FINA 3010 Finance I Assignment Comprehensive Problem - Cash Budget Toys for You, a manufacturing company, has been growing quickly but has found that its financial situation is continually under pressure. Production has fluctuated to meet demand in an attempt to provide first-class service, resulting in larger inventory positions. Al ximately 60 days, which is well above the terms of 30 days. To address the finanical concerns, Toys for You has proposed level production and an effort by the credit department to bring the average collection period down to 35 days (83% collected in the month of the sale and 17% collected in the month following the sale). Estimated sales for the upcoming months are: July August September $1,957,500 October 2,070,000 November 2,205,000 December 2,362,500 2,475,000 2,565,000 Sales for May were $1,732,500 and will be approximately $1,845,000 for the current month of June. The collection period for May and June is 60 days (50% collected in the month of the sale and 50% collected in the following month). The collection period page It is projected that the current collection period of 60 days will be reduced to 35 days for the months July through December(83% collected in the month of the sale and 17% collected in the month following the sale). Material purchases are forecast to be $585,000 a month beginning in July. In May they were $675,000 and in June they are expected to be $607,500. The purchases are paid in 40 days (67% paid in the month of the purchase and 33% paid in the month following the purchase). Materials used per month beginning in July will be $744,000. Labour expense will be paid when incurred and are expected to be $195,000 a month. Other expenses will also be paid as incurred and are expected to be $375,000 a month. Cost of goods sold has regularly been 70 percent of sales. Amortization is $38,000 per month. Selling and administrative expenses are expected to be 13 percent of sales and are paid in the month of the sale. The income tax rate is 42 percent. There will be payments on notes of $675,000 in each of August and November. Interest of $270,000 and income taxes of $338,000 are both due in October. Dividends of $22,500 are payable in July and October. $666 3,578 8,231 12,475 TOYS FOR YOU Balance Sheet (estimated) June 30, 2016 ($ thousands) Assets Current assets: Cash Accounts receivable Inventory Total current assets Capital assets: Plant and equipment 11,273 Less: Accumulated amortization 4,784 Total assets Liabilities and Shareholders' Equity Current liabilities: Accounts payable Notes payable Accrued liabilities Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and shareholders' equity 6,489 $18.964 $945 3,700 2,596 7,241 4,725 4,500 2,498 $18.964 Required Using the information above, prepare a cash budget for the six-month period (July-December) and identify any need for short-term financing. There are no changes in accounts not mentioned above. You must include a column for each of the six months and a total for all six months. FINA 3010 Finance I Assignment Comprehensive Problem - Cash Budget Toys for You, a manufacturing company, has been growing quickly but has found that its financial situation is continually under pressure. Production has fluctuated to meet demand in an attempt to provide first-class service, resulting in larger inventory positions. Al ximately 60 days, which is well above the terms of 30 days. To address the finanical concerns, Toys for You has proposed level production and an effort by the credit department to bring the average collection period down to 35 days (83% collected in the month of the sale and 17% collected in the month following the sale). Estimated sales for the upcoming months are: July August September $1,957,500 October 2,070,000 November 2,205,000 December 2,362,500 2,475,000 2,565,000 Sales for May were $1,732,500 and will be approximately $1,845,000 for the current month of June. The collection period for May and June is 60 days (50% collected in the month of the sale and 50% collected in the following month). The collection period page It is projected that the current collection period of 60 days will be reduced to 35 days for the months July through December(83% collected in the month of the sale and 17% collected in the month following the sale). Material purchases are forecast to be $585,000 a month beginning in July. In May they were $675,000 and in June they are expected to be $607,500. The purchases are paid in 40 days (67% paid in the month of the purchase and 33% paid in the month following the purchase). Materials used per month beginning in July will be $744,000. Labour expense will be paid when incurred and are expected to be $195,000 a month. Other expenses will also be paid as incurred and are expected to be $375,000 a month. Cost of goods sold has regularly been 70 percent of sales. Amortization is $38,000 per month. Selling and administrative expenses are expected to be 13 percent of sales and are paid in the month of the sale. The income tax rate is 42 percent. There will be payments on notes of $675,000 in each of August and November. Interest of $270,000 and income taxes of $338,000 are both due in October. Dividends of $22,500 are payable in July and October. $666 3,578 8,231 12,475 TOYS FOR YOU Balance Sheet (estimated) June 30, 2016 ($ thousands) Assets Current assets: Cash Accounts receivable Inventory Total current assets Capital assets: Plant and equipment 11,273 Less: Accumulated amortization 4,784 Total assets Liabilities and Shareholders' Equity Current liabilities: Accounts payable Notes payable Accrued liabilities Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and shareholders' equity 6,489 $18.964 $945 3,700 2,596 7,241 4,725 4,500 2,498 $18.964 Required Using the information above, prepare a cash budget for the six-month period (July-December) and identify any need for short-term financing. There are no changes in accounts not mentioned above. You must include a column for each of the six months and a total for all six months