We really need to get this new material-handling equipment in operation just after the new year...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
"We really need to get this new material-handling equipment in operation just after the new year begins. I hope we can finance it largely with cash and marketable securities, but if necessary we can get a short-term loan down at MetroBank." This statement by Beth Davies-Lowry, president of Intercoastal Electronics Company, concluded a meeting she had called with the firm's top management. Intercoastal is a small, rapidly growing wholesaler of consumer electronic products. The firm's main product lines are small kitchen appliances and power tools. Marcial Wilcox, Intercoastal's General Manager of Marketing, has recently completed a sales forecast. She believes the company's sales during the first quarter of 20x1 will increase by 10 percent each month over the previous month's sales. Then Wilcox expects sales to remain constant for several months. Intercoastal's projected balance sheet as of December 31, 20x0, is as follows: Cash Accounts receivable Marketable securities Inventory Buildings and equipment (net of accumulated depreciation) Total assets Accounts payable Bond interest payable Property taxes payable Bonds payable (5%; due in 20x6) Common stock Retained earnings Total liabilities and stockholders' equity S 55,000 324,000 15,000 211,200 634,000 $1,239,200 $ 241.920 6,250 6,000 300,000 500,000 185,030 $ 1,239,200 Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of 20x1. In the process, the following information has been accumulated: 000 $180.000 Credit sales tunically are 75 percent of total sales 1. Projected sales for December of 20x0 are $480,000. Credit sales typically are 75 percent of total sales. Intercoastal's credit experience indicates that 10 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month. 2. Intercoastal's cost of goods sold generally runs at 80 percent of sales. Inventory is purchased on account, and 40 percent of each month's purchases are paid during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to have inventory at the end of each month equal to half of the next month's projected cost of goods sold. 3. Hanson has estimated that Intercoastal's other monthly expenses will be as follows: Sales salaries Advertising and promotion Administrative salaries Depreciation Interest on bonds Property taxes $ 12,000 10,000 12,000 25,000 1.250 1,500 In addition, sales commissions run at the rate of 2 percent of sales. 4. Intercoastal's president, Davies-Lowry, has indicated that the firm should invest $120,000 in an automated inventory-handling system to control the movement of inventory in the firm's warehouse just after the new year begins. These equipment purchases will be financed primarily from the firm's cash and marketable securities. However, Davies-Lowry believes that Intercoastal needs to keep a minimum cash balance of $30,000. If necessary, the remainder of the equipment purchases will be financed using short-term credit from a local bank. The minimum period for such a loan is three months. Hanson believes short-term interest rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary, Davies-Lowry has decided it should be paid off by the end of the first quarter if possible. 5. Intercoastal's board of directors has indicated an intention to declare and pay dividends of $25,000 on the last day of each quarter. 6. The interest on any short-term borrowing will be paid when the loan is repaid. Interest on Intercoastal's bonds is 5. Intercoastal's board of directors has indicated an intention to declare and pay dividends of $25,000 on the last day of each quarter. 6. The interest on any short-term borrowing will be paid when the loan is repaid. Interest on Intercoastal's bonds is paid semiannually on January 31 and July 31 for the preceding six-month period. 7. Property taxes are paid semiannually on February 28 and August 31 for the preceding six-month period. Required: Prepare Intercoastal Electronics Company's master budget for the first quarter of 20x1 by completing the following schedules and statements. 6. Calculation of required short-term borrowing. Projected cash balance as of December 31, 20x0 Less: Minimum cash balance Cash available for equipment purchases Projected proceeds from sale of marketable securities Cash available Less Cost of investment in equipment Required short-term borrowing "We really need to get this new material-handling equipment in operation just after the new year begins. I hope we can finance it largely with cash and marketable securities, but if necessary we can get a short-term loan down at MetroBank." This statement by Beth Davies-Lowry, president of Intercoastal Electronics Company, concluded a meeting she had called with the firm's top management. Intercoastal is a small, rapidly growing wholesaler of consumer electronic products. The firm's main product lines are small kitchen appliances and power tools. Marcial Wilcox, Intercoastal's General Manager of Marketing, has recently completed a sales forecast. She believes the company's sales during the first quarter of 20x1 will increase by 10 percent each month over the previous month's sales. Then Wilcox expects sales to remain constant for several months. Intercoastal's projected balance sheet as of December 31, 20x0, is as follows: Cash Accounts receivable Marketable securities Inventory Buildings and equipment (net of accumulated depreciation) Total assets Accounts payable Bond interest payable Property taxes payable Bonds payable (5%; due in 20x6) Common stock Retained earnings Total liabilities and stockholders' equity S 55,000 324,000 15,000 211,200 634,000 $1,239,200 $ 241.920 6,250 6,000 300,000 500,000 185,030 $ 1,239,200 Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of 20x1. In the process, the following information has been accumulated: 000 $180.000 Credit sales tunically are 75 percent of total sales 1. Projected sales for December of 20x0 are $480,000. Credit sales typically are 75 percent of total sales. Intercoastal's credit experience indicates that 10 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month. 2. Intercoastal's cost of goods sold generally runs at 80 percent of sales. Inventory is purchased on account, and 40 percent of each month's purchases are paid during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to have inventory at the end of each month equal to half of the next month's projected cost of goods sold. 3. Hanson has estimated that Intercoastal's other monthly expenses will be as follows: Sales salaries Advertising and promotion Administrative salaries Depreciation Interest on bonds Property taxes $ 12,000 10,000 12,000 25,000 1.250 1,500 In addition, sales commissions run at the rate of 2 percent of sales. 4. Intercoastal's president, Davies-Lowry, has indicated that the firm should invest $120,000 in an automated inventory-handling system to control the movement of inventory in the firm's warehouse just after the new year begins. These equipment purchases will be financed primarily from the firm's cash and marketable securities. However, Davies-Lowry believes that Intercoastal needs to keep a minimum cash balance of $30,000. If necessary, the remainder of the equipment purchases will be financed using short-term credit from a local bank. The minimum period for such a loan is three months. Hanson believes short-term interest rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary, Davies-Lowry has decided it should be paid off by the end of the first quarter if possible. 5. Intercoastal's board of directors has indicated an intention to declare and pay dividends of $25,000 on the last day of each quarter. 6. The interest on any short-term borrowing will be paid when the loan is repaid. Interest on Intercoastal's bonds is 5. Intercoastal's board of directors has indicated an intention to declare and pay dividends of $25,000 on the last day of each quarter. 6. The interest on any short-term borrowing will be paid when the loan is repaid. Interest on Intercoastal's bonds is paid semiannually on January 31 and July 31 for the preceding six-month period. 7. Property taxes are paid semiannually on February 28 and August 31 for the preceding six-month period. Required: Prepare Intercoastal Electronics Company's master budget for the first quarter of 20x1 by completing the following schedules and statements. 6. Calculation of required short-term borrowing. Projected cash balance as of December 31, 20x0 Less: Minimum cash balance Cash available for equipment purchases Projected proceeds from sale of marketable securities Cash available Less Cost of investment in equipment Required short-term borrowing
Expert Answer:
Related Book For
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-1259569562
11th edition
Authors: Ronald W. Hilton
Posted Date:
Students also viewed these accounting questions
-
We really need to get this new material-handling equipment in operation just after the New Year begins. I hope we can finance it largely with cash and marketable securities, but if necessary we can...
-
The Edwards Lake Community Hospital balance sheet as of December 31, 2019, follows. Required a. Record in general journal form the effect of the following transactions during the fiscal year ended...
-
"We really need to get this new material-handling equipment in operation just after the new year begins. I hope we can finance it largely with cash and marketable securities, but if necessary we can...
-
Why do you think it took so long for LuLu's desserts to launch its export business?
-
What is the purpose of an approval committee? Who is usually on this committee?
-
You have just started to work in the purchasing office of a major pharmaceutical firm. The purchasing manager has asked you to assist in writing an RFP for a major purchase. The manager gives you a...
-
Which parts of the accounting equation does a sale on account affect? a. Accounts receivable and Accounts payable b. Accounts receivable and Retained earnings c. Accounts payable and Retained...
-
Transfer pricing, goal congruence. The Orsilo Corporation makes end sells 10,000 multisystem music players each year Its Assembly Division purchases components from other divisions of Orsilo or from...
-
STRATEGIES (How do you plan to accomplish your objectives?) Who would you recommend as the key primary target audience for your marketing campaign? What segment of the market should CrossFit Stasis...
-
John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020, John worked as a computer technician at a local university earning a salary of $152,000, and...
-
I need help with these questions and if I could get them within an hour of posting it that would be great! Thank You Swayne Johnson has been assigned as the audit senior for the audit of Sports...
-
Compare and contrast the responsibilities of the auditor general and public protector in South Africa.
-
Briefly discuss the role of the South African Reserve Bank (SARB) in the countrys economy.
-
Discuss the role of the minister of finance as a key role player in public financial management in South Africa.
-
Discuss the National Prosecuting Authority with specific reference to its role in combating corruption in South Africa.
-
Briefly discuss the processes involved in performance budgeting, as well as its advantages and disadvantages.
-
Shoe Inc manufactures two types of summer sandals: bamboo and leather. The costs and financial data for both lines of sandals are shown in the table below. Sales Price Variable costs Number of Units...
-
Is it a breach of fiduciary duty for a director of a real estate investment trust (REIT) negotiating a joint venture on behalf of the REIT with another director for the development of a portfolio of...
-
Due to evaporation during production, Plano Plastics Company requires 8 pounds of material input for every 7 pounds of good plastic sheets manufactured. During May, the company produced 4,200 pounds...
-
Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 5.00 p per unit. Fixed costs are expected to amount to 60,000 p for the year, and all variable...
-
What is a customer profitability profile?
-
From the trial balance for Forlegco for 31 July 2010 (Exercise E2.3) (i) Prepare a simple income statement for July 2010. (ii) Has Forlegco made a profit in July? (iii) If Forlegco has not made a...
-
From the trial balance for Forlegco for 31 July 2010 (Exercise E2.3) prepare a simple statement of cash flows for July 2010. DATA (Exercise E2.3) Arthur Moment set up a table-making business,...
-
You are required to prepare the appropriate correcting entries in a companys accounts at 31 December 2010 for the following: (i) A cheque paid for rent amounting to 2,400 has been entered into the...
Study smarter with the SolutionInn App