Appendix I Rudolph Corporation Cash Budget Notes Sales Information The unit selling price is $60.00 per...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Appendix I Rudolph Corporation Cash Budget Notes Sales Information The unit selling price is $60.00 per unit. On average, 10% of the monthly sales are collected in cash and the remaining 90% of the sales are sold on credit. The collection pattern for the credit sales is that 40% are received in the month of sale, 50% are received in the month following sale, and 7% are received in the second month following the sale. Any remaining amounts are deemed uncollectible. Actual and estimated unit sales are below. Month Units sold August (actual) September (actual) 1,500 5,000 October (estimated) 10,000 November (estimated) 27,000 December (estimated) 40,000 Supplier Payment Information Typically, Rudolph pays 35% of the cost of the purchases in the month of purchase and 65% in the following month. The average cost of purchase is $28.00 per unit. Actual and estimated unit purchases of inventory are provided below. Month Inventory Units Purchased August (actual) September (actual) 2,500 15,000 October (estimated) 20,000 November (estimated) 50,000 December (estimated) 25,000 Other information: Operating expenses total $70,000 monthly, including $20,500 of depreciation expense. In December, the company must hire extra employees at a total cost of $75,000. Annual property taxes for the production facility are paid on December 30th. The total payment required is $40,000 Rudolph rents a large storage facility for $6,000 per month. Per the lease agreement, Rudolph is required to prepay 6 months of rent on December 31. The cash balance at the end of September was $30,000. Rudolph Corporation ("Rudolph") is experiencing cashflow difficulties and the bank is considering demanding repayment of an existing loan due to the uncertainty of the company's ability to make loan payments as they become due. The bank has asked that the company prepare a cash budget for three months, October, November, and December. They are interested in knowing if Rudolph can repay $100,000 of a term loan due at the end of December. Rudolph's accounting assistant gathered relevant information and prepared notes to help you with the requirements below, see Appendix I. Required: 1. Prepare the cash budget for October, November, and December. (12 marks) 2. Will Rudolph be able to make the loan re-payment on December 31? (2 marks) 3. After completing the cash budget, explain why the bank might be concerned about the cash flow. Can the situation be mitigated in future years? (2 marks) Appendix I Rudolph Corporation Cash Budget Notes Sales Information The unit selling price is $60.00 per unit. On average, 10% of the monthly sales are collected in cash and the remaining 90% of the sales are sold on credit. The collection pattern for the credit sales is that 40% are received in the month of sale, 50% are received in the month following sale, and 7% are received in the second month following the sale. Any remaining amounts are deemed uncollectible. Actual and estimated unit sales are below. Month Units sold August (actual) September (actual) 1,500 5,000 October (estimated) 10,000 November (estimated) 27,000 December (estimated) 40,000 Supplier Payment Information Typically, Rudolph pays 35% of the cost of the purchases in the month of purchase and 65% in the following month. The average cost of purchase is $28.00 per unit. Actual and estimated unit purchases of inventory are provided below. Month Inventory Units Purchased August (actual) September (actual) 2,500 15,000 October (estimated) 20,000 November (estimated) 50,000 December (estimated) 25,000 Other information: Operating expenses total $70,000 monthly, including $20,500 of depreciation expense. In December, the company must hire extra employees at a total cost of $75,000. Annual property taxes for the production facility are paid on December 30th. The total payment required is $40,000 Rudolph rents a large storage facility for $6,000 per month. Per the lease agreement, Rudolph is required to prepay 6 months of rent on December 31. The cash balance at the end of September was $30,000. Rudolph Corporation ("Rudolph") is experiencing cashflow difficulties and the bank is considering demanding repayment of an existing loan due to the uncertainty of the company's ability to make loan payments as they become due. The bank has asked that the company prepare a cash budget for three months, October, November, and December. They are interested in knowing if Rudolph can repay $100,000 of a term loan due at the end of December. Rudolph's accounting assistant gathered relevant information and prepared notes to help you with the requirements below, see Appendix I. Required: 1. Prepare the cash budget for October, November, and December. (12 marks) 2. Will Rudolph be able to make the loan re-payment on December 31? (2 marks) 3. After completing the cash budget, explain why the bank might be concerned about the cash flow. Can the situation be mitigated in future years? (2 marks)
Expert Answer:
Answer rating: 100% (QA)
Based on the information provided in the Appendix I Rudolph Corporation Cash Budget Notes here is th... View the full answer
Related Book For
Cornerstones of Managerial Accounting
ISBN: 978-0176530884
2nd Canadian edition
Authors: Maryanne M. Mowen, Don Hanson, Dan L. Heitger, David McConomy, Jeffrey Pittman
Posted Date:
Students also viewed these accounting questions
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
This assignment requires you to complete the 2022 tax reporting for a fictional woman named Anna Smith. Question 1 T1 - step 4 - line 66 This is Anna's taxable income Answer: Question 2 T1 - step...
-
A record company needs to produce 100 gold records at one or more of its three studios. the cost of producing x records at studio 1 is 10 x; the cost of producing y records at studio 2 is 2y 2 ; the...
-
Describe the conditions necessary for a geocentric recruitment policy to work effectively.
-
Two sides of a triangle have lengths 8 m and 16 m. The angle between them is increasing at a rate of 0.05 radians /min. How fast is the length of the third side increasing when the angle between the...
-
What are the wo most important software features that should be implemented for a successful vibration trending program?
-
New York Beverages, Inc., has three plants that make and bottle cola, lemon-lime, and miscellaneous flavored beverages, respectively. The raw materials, labor costs, and automated technology are...
-
An agent makes the following statement to a potential buyer: 'The property has amazing views - look at these images. You can see all the way to the bay!' The agent shows the buyer images of the...
-
Ed owned a large, roughly square plot of farmland bordering on a river. He decided to subdivide the plot into two, equal-size parcels with a common north to south boundary. Ed assumed the west parcel...
-
What is output? #include using namespace std; class Line () public: }; Line () { } int main() { cout < < "No Such line"; ,} Line L1, *L2; return 0; No output O L1 *L2 O Compiler error O No Such Line
-
Considering the value X given in table 01, set up engineering economics relations to compute the equivalent value in Year 3 for the cash flow estimates in following figure (i-X per six months). 0 1 2...
-
What does the following JavaScript statement evaluate too? Show your mathematical work to explain what happens. (No marks for just the answer) "45"-(5*7)+("4"* null)+7
-
The Vice President of XYZ, Inc.'s PMO has a monthly meeting with the Vice Presidents from all areas of the organization. This meeting serves multiple purposes, including enhancing collaboration among...
-
Scrooge is a Bedford-based manufacturer of high quality china and it is considering launching a new line of products linked to Prince George and Princess Charlotte called FK&Q (acronym for future...
-
1. Do you agree that police should be able to search the personal belongings of vehicle occupants as part of a valid search under the automobile exception? Why or why not? 2-does the limitation that...
-
For the following exercises, write the polynomial function that models the given situation. Consider the same rectangle of the preceding problem. Squares of 2x by 2x units are cut out of each corner....
-
What are the key differences between financing entrepreneurial and established companies?
-
What is the purpose of staged financing?
-
What can and can't we learn from successful start-ups like Pandora's Box and Spotify?
Study smarter with the SolutionInn App