Bobcat Printingmakes customt---shirts and other promotional productsforstudent o
ID: 2588903 • 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
30 . What is the projected interest payable for the first quarter of operations? A. $0 B. $14 C. $19 D. $34
31. Points What is the projected net cash flow from operating activities for the first quarter of operations? A. $0 B. $14,446 C. $12,846 D. $25,973
32 . What is the projected net cash flow for investing activities for the first quarter of operations? A. ($3,000) B. $8,000 C. ($8,000) D. $3,000
33. What is the projected cash flow from financing activities for the first quarter of operations? A. ($15,000) B. $15,000 C. $1,700 D. ($1,700) E. ($16,700)
Explanation / Answer
30. Projected interest payable for the first quarter of operations -- D $34.
31. Cash flow from operating activities : D. $25,973
32. Projected cash flow from investing activities - C ($8,000)
33. Projected cash flow from financing activities - A ($15,000)
Workings:
Sales and collection budget Month1 Month2 Month3 Total Budgeted sales 30000 32500 34000 96500 Collections Month of sale 15000 16250 17000 48250 Moth following sale 15000 16250 31250 Total collections 15000 31250 33250 79500 Cost of goods sold budget Month1 Month2 Month3 Total Budgeted sales 30000 32500 34000 96500 Cost of goods sold (40% of sales) 12000 13000 13600 38600 Cash payment for cost of goods sold 12000 13000 25000 SG & A expenses budget Month1 Month2 Month3 Total Donations (10% of sales) 3000 3250 3400 9650 Advertising expenses (3% of sales) 900 975 1020 2895 Miscellaneous expenses (1% of sales) 300 325 340 965 Rent 5000 5000 5000 15000 Total SG&A expenses 9200 9550 9760 28510 Cash budget Month1 Month2 Month3 Total Begining balance 2500 5466 0 Cash collections from customers 15000 31250 33250 79500 Cash available for disbursements 15000 33750 38716 79500 Cash disbursements: For cost of goods sold 0 12000 13000 25000 For donations 3000 3250 3400 9650 For advertising expenses 900 975 1020 2895 For miscellaneous expenses 300 325 340 965 For Rent 5000 5000 5000 15000 For purchase of building 8000 8000 For drawings 5000 5000 5000 15000 Interest 0 34 34 Total cash disbursements 14200 26584 35760 76544 Cash surplus /(Deficit) 800 7166 2956 2956 Financing Borrowing 1700 1700 Repayment -1700 -1700 Ending cash balance 2500 5466 2956 2956