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    owais318 Posts: 1, Reputation: 1
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    Oct 23, 2010, 11:20 AM
    Prepare a Budgeted Income Statement, Cash Budget, Sales Budget/Cash Collections, Purc
    The CEO of Kingston Cart Inc. asked the Chief Financial Officer to prepare a Master Budget for the next three months, beginning July 1, 2010. The company's policy is to maintain a minimum cash balance of $6,000 at each month end.
    Sales are forecasted at an average selling price of $70 per cart. The company wishes to maintain an ending Inventory balance of $16,000. Component costs are $40 for each cart. Purchases during any given month are paid in full during the following month. All sales are on credit, payable within 30 days, but experience has shown that 70% of current sales are collected in the current month, 20% in the next month and 10% in the month thereafter. Bad debts are negligible.

    Wages and salaries $16,000
    Insurance expired 120
    Amortization 3,000
    Miscellaneous 3,500
    Rent 1,000

    Cash dividends of $1,500 are to be paid quarterly, beginning January 15.

    All operating expenses are to be paid as incurred, except insurance and amortization. Rent is paid at the beginning of each month.
    The company plans to buy new fixtures in July for $5,000.

    Money can be borrowed and repaid in multiples of $500, at an interest rate of 10% per annum. Management wants to minimize borrowing and repay any loans as quickly as possible. Interest is computed and paid when the principal is repaid. Assume that any new borrowings take place at the beginning of the month and repayments occur at the end of the month.
    Assume that new borrowings and related repayment do not both occur within the same month. Compute interest to the nearest dollar.
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    Oct 25, 2010, 09:02 AM

    What is the question? You need to attempt to solve this yourself, then if you have a question we will try to help you or we can review your work to see if you are on the right track.

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