Show detail solutions please Prepare a Cash Flow Forecast for AudioFile for the
ID: 2537684 • Letter: S
Question
Show detail solutions please
Prepare a Cash Flow Forecast for AudioFile for the month of January 2018. Include appropriate supporting schedules
AudioFile Products Ltd. is a retailer that sells sound systems. The company is planning its cash needs for the month of January, 2018. In the past, AudioFile has had to borrow money during the post-Christmas season to offset a significant decline in sales. The following information has been assembled to assist in preparing a cash flow forecast for January January 2018 Forecasted Income Statement $200,000 150,000 50,000 Sales Cost of goods sold Gross profit Variable selling expenses Fixed administrative expenses Forecasted net operating income $10,000 20,000 30,000 $ 20,000 (1) | Sales are 10% for cash and 90% on credit. (2) Credit sales are collected over a three-month period with 40% collected in the month of sale, 30% in the following month, and 20% in the second month following sale. November 2017 sales totaled $300,000 and December 2017 sales totaled $500,000 (3) 40% of a month's inventory purchases are paid for in the same month. The remaining 60% are paid in the following month. Accounts payable relate solely to inventory purchases. At December 31, these totaled $400,000 (4) The company maintains its ending inventory levels at 60% of the cost of the merchandise to be sold in the following month. The merchandise inventory at December 31, 2017 was $90,000 February 2018 sales are budgeted at $150,000. Gross profit percentage is expected to remain unchanged (5) The company pays a $10,000 monthly cash dividend to shareholders (6) The cash balance at December 31, 2017 was $30,000, the company must maintain a cash balance of at least this amount at the end of each month (7) The company can borrow on its operating loan in increments of $10,000 at the beginning of each month, up to a total loan balance of $500,000. The interest rate on this loan is 1% per month payable in the month following the loan. There is no operating loan at December 31 2017 Required Prepare a Cash Flow Forecast for AudioEile for the month of January 2018. Include appropriate supporting schedules. Refer to Problem 3-2 on page 127 of Selected Topics in Management Accounting keeping in mind that AudioEile has been in business for awhile and the operating budget worksheet is not requiredExplanation / Answer
Cash Flow Forecast for AudioFile for the month of January 2018
Particular Amount A Cash Balance on 1st Jan,2018 30,000 Cash Inflow 1 Cash Sale 20,000 (10% of 200,000) 2 Collection against Credit Sales From Sales of Jan,18 80,000 (40% of 200,000) From Sales of Dec,17 1,50,000 (30% of 500,000) From Sales of Nov,17 60,000 (20% of 300,000) B Total Cash Inflow 3,10,000 Cash Out Flow 1 Inventory Purchase Cost of Goods Sold 1,50,000 (+) Closing inventory 67,500 (75% of 150000) x 60% (-) Opening Inventory 90,000 Inventory Purchase in Jan,18 1,27,500 Payment against Jan,18 Inventory Purchase 40% 51,000 Payment against Dec,17 Inventory Purchase 4,00,000 2 Cash Divident to Shareholders 10,000 C Total Cash Outflow 4,61,000 D Net Cash in Hand -1,21,000 E Minimum Balance to be maintain on 31st Jan 30,000 F Operating Loan to be borrow in Jan,18 1,51,000