Bobcat Printingmakes customt---shirts and other promotional productsforstudent o
ID: 2588901 • Letter: B
Question
Bobcat Printingmakes customt---shirts and other promotional productsforstudent organizations and ... Bobcat Printingmakes customt---shirts and other promotional productsforstudent organizations and businesses. It is beginning its first year of operations and needs to plan for its first quarter of operations. They would like to maximize their profits, and understand that accurate budgeting can help achieve that goal. The budgets will be prepared based on the following information: a. Sales are budgeted at $30,000 for Month 1, $32,500 for Month 2, and $34,000 for Month 3. All sales will be done on account. Company does not expect to have any cash sales. b. Sales are collected 50% in the month of the sale, and 50% in the month following the sale. c. Cost of Goods Sold is budgeted at 40% of Sales. d. Monthly selling, general, and administrative expenses are as follows: donations are 10% of sales; advertising is 3% of sales; miscellaneous is 1% of sales; and rent is $5,000 per month. All SG&A expenses are paid in the month they are incurred. e. Since all of the orders are custom made, no inventory is kept on hand at the end of the month. f. Inventory purchases are paid in full in the month following the purchase. g. Bobcat Printing is planning to purchase a building in Month 3 for $8,000 in cash. h. They would like to maintain a minimum cash balance of $2,500 at the end of each month. The company has an agreement with a local bank that allows them to borrow, with a total line of credit of $20,000. The interest rate on these loans is 1% per month (12% annual). They would as far as able, repay the loan on the last day of the month when it has enough cash to pay the full balance and maintain an adequate ending cash balance. i. The owner makes a draw of $5,000 every month. (Note: sole proprietors and partnerships take owner’s draws, while stockholders receive dividends). When making calculations always round up (for example: 33 × 7% = 2.31, round up to 3.00). Check Figures: Gross Margin $57,900 Total assets $27,973 Ending Retained Earnings $14,373
26 . What is the projected total owner's equity for the first quarter of operations? A. $14,373 B. $6,240 C. $2,973 D. $12,000
27. What is the projected ending cash balance for the first quarter of operations? A. $12,846 B. $2,973 C. $0 D. $3,846
28 . What is the projected accounts receivables balance for the first quarter of operations? A. $17,000 B. $8,400 C. $6,250 D. $14,200
29 . What is the projected account payable for the first quarter of operations? A. $13,600 B. $9,100 C. $8,000 D. $6,400
Explanation / Answer
26. $14,373
27. $2973
28. A. $17,000
50% of the sales in month 3 due for collection in month 4, hence accounts receivables is (34000*50%)
29. A. 13,600
Purchases are paid for in the month following the purchases, hence accounts payable for first quarter of operations would be prchases made for month 3.
Month 1 Month 2 Month 3 Opening cash balance 2500 5483 Cash sales $15,000 $16,250 $17,000 Credit sales $15,000 $16,250 Total cash available for use $15,000 $33,750 $38,733 Purchases $12,000 $13,000 Donations $3,000 $3,250 $3,400 Advertising $900 $975 $1,020 Misc. $300 $325 $340 rent $5,000 $5,000 $5,000 building $8,000 drawings $5,000 $5,000 $5,000 Total payments $14,200 $26,550 $35,760 Net cash $800 $7,200 $2,973 Ending cash balance $2,500 $5,483 $2,973 Cash required $1,700 Int on loan $17 Repayment of loan $1,700