Alexa had recently taken over her aunt’s business selling pots and ceramic wares after she graduated from JP University with a Bachelor of Business in 2019. Now she wants you to do some financial analysis for the business. Alexa has provided you with the following financial statements for 2017/2018 and 2018/2019 fiscal years. Please ignore any taxation-related matters in this question.

following forecasts for her business in 2021.

Quarters	Sales Revenue	Purchases
Q3 2020 (Actual)	50,000	9,750
Q4 2020 (Actual)	55,000	10,000
Q1 2021	75,000	12,500
Q2 2021	60,000	10,500
Q3 2021	65,000	11,000
Q4 2021	60,000	10,000

Cash collections 70% of Alexa’s quarterly sales are cash sales and the remaining 30% are credit sales. Cash collections from credit customers are:

80% of credit sales are collected in the quarter following the sale.

20% of credit sales are collected in the second quarter following the sale.80% of all purchases are paid for in the quarter they are purchased, with the remaining 20% paid for in the following quarter. The business also plans to take out a small business loan of $50,000 at the end of Quarter 1 2021 and will be repaying it back in Quarter 1 of 2022. Equipment costing $70,000 is expected to be bought in Q2 2020 following the receipt of the business loan.

The selling expenses are $15,000 each quarter. Administrative expenses are $12,000 per quarter, excluding depreciation expenses. Expenses are paid in the quarter they are incurred. Alexa also predicts cash at hand amounting to $16,300 as at 30^th June 2020.

Required:

From the information above, prepare a properly classified Income Statement for the 2019/2020 fiscal year. From the information above, prepare Balance Sheet as at the fiscal end of 2020. Prepare a schedule of cash collections, a schedule of purchase payments, and a cash budget for all four quarters in 2021,business as at the fiscal end of 2023.

Transcribed Image Text:

Income Sales Less Cost of Goods Sold Gross Profit Less Expenses: Selling Expenses Salaries-sales staff Advertising Delivery Sales Commissions General & Admin. Expenses Office expenses Salaries - General staff Interest Total operating expense Net Profit/ (Loss) Income Statement $ 2018 8,500 750 995 1,250 3,250 16,100 2,850 $ 151,000 (25,150) 125,850 (11,495) (22,200) (33,695) 92,155 $ 2019 14,500 1,450 1,400 1,550 3,350 16,650 3,950 $ 170,500 (33,050) 137,450 (18,900) (23,950) (42,850) 94,600 Income Sales Less Cost of Goods Sold Gross Profit Less Expenses: Selling Expenses Salaries-sales staff Advertising Delivery Sales Commissions General & Admin. Expenses Office expenses Salaries - General staff Interest Total operating expense Net Profit/ (Loss) Income Statement $ 2018 8,500 750 995 1,250 3,250 16,100 2,850 $ 151,000 (25,150) 125,850 (11,495) (22,200) (33,695) 92,155 $ 2019 14,500 1,450 1,400 1,550 3,350 16,650 3,950 $ 170,500 (33,050) 137,450 (18,900) (23,950) (42,850) 94,600

Answer rating: 100% (QA)

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