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Posted by: Homeworkhelp
Price Quoted by Student: $15
Posted On: 2016-05-13 08:08:02
 
Question
P5-35 GrowMaster Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firm’s marketing director, has completed the following sales forecast.
Month              Sales                            Month                          Sales
January                        $905,800                     July                              $1,510,000
February          $1,000,900                  August                         $1,510,000
March              $905,800                     September                    $1,603,300
April                $1,156,200                  October                        $1,603,300
May                 $1,250,600                  November                    $1,510,000
June                 $1,405,500                  December                    $1,709,200

Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for
preparing the cash flow projection. He has gathered the following information.
All sales are made on credit.
GrowMaster’s excellent record in accounts receivable collection is expected to continue, with
60 percent of billings collected in the month after sale and the remaining 40 percent collected
two months after the sale.
Cost of goods sold, GrowMaster’s largest expense, is estimated to equal 40 percent of sales
dollars. Seventy percent of inventory is purchased one month prior to sale and 30 percent
during the month of sale. For example, in April, 30 percent of April cost of goods sold is
purchased and 70 percent of May cost of goods sold is purchased.
All purchases are made on account. Historically, 75 percent of accounts payable have been
paid during the month of purchase, and the remaining 25 percent in the month following
purchase.
Hourly wages and fringe benefits, estimated at 30 percent of the current month’s sales, are
paid in the month incurred.
General and administrative expenses are projected to be $1,573,400 for the year. A
breakdown of the expenses follows. All expenditures are paid monthly throughout the year,
with the exception of property taxes, which are paid in four equal installments at the end of
each quarter.
Salaries and fringe benefits      $327,100
Advertising                              377,800
Property taxes                          143,800
Insurance                                 194,500
Utilities                                                183,000
Depreciation                            347,200
            Total                            $ 1,573,400

Operating income for the first quarter of the coming year is projected to be $329,600.
GrowMaster is subject to a 40 percent tax rate. The company pays 100 percent of its
estimated taxes in the month following the end of each quarter. GrowMaster maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 12 percent line of credit in order to maintain the balance.  All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000).  Accrued interest is paid in full with each principal repayment.  The projected cash balance on April 1 is $50,000. 
$50,000 at the end of the month, the company borrows against its 12 percent line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $51,100.


Required
(a) Prepare the cash receipts budget for the second quarter. (Enter answers in necessary fields
only. Leave other fields blank. Do not enter 0.)
Cash Receipts Budget
April February sales
May June
$
$
$
$
$
$
March sales April sales May sales Totals
Accounts Receivable balance at the end of second quarter of 2012 $
Attempts: 0 of 3 used
(b) The parts of this question must be completed in order. This part will be available when you
complete the part above.
(c) The parts of this question must be completed in order. This part will be available when you
complete the part above.
(d) The parts of this question must be completed in order. This part will be available when you
complete the part above.

TUTORIAL PREVIEW 
April
May
June
Total Cash Receipts
Accounts Receivable
February Sales
 $      400,360
 $      400,360
March Sales
 $      543,480
 $       362,320
 $      905,800



Solutions
Price $15
Attachment 1: P5-35 GrowMaster Products.xlsx
Solution Posted By: Homeworkhelp    Posted on: 13-05-2016