Acct 2220 Zeigler – Chapter 7 Case Study (through Jan)
NOTE: January full solution below. Review & complete Feb / Mar work)
Acct 2220: Chp 7 Case Study - Workpapers (Pg 1/4)
A. Sales Budget
B. Schedule of Cash Receipts
C. Pro Forma Financial Stmt information
Estimated Sales Growth Rate
Sales Budget
A) PROJECTED SALES
Cash Sales
Sales on Account
Total Budgeted Sales
10% per month
Jan
100,000
300,000
400,000
Feb
110,000
330,000
440,000
B) SCH OF CASH RECEIPTS
Current Month’s Cash Sales
100,000
+ 100% of Previous Month's A/R
0
Total Budgeted Cash Collections 100,000
110,000
300,000
410,000
Mar
Pro Forma
Stmt @3/31
xxxxxx
(1)
(2)
xxxxxx
xxxxxx
xxxxxx
(1) Accounts receivable balance on March 31 pro forma balance sheet.
(2) Sales revenue on first quarter pro forma income statement (sum of monthly sales).
D. Inventory Purchases Budget
E. Schedule of Cash Payments for Inventory
F. Pro Forma Financial Stmt Information
** COGS = 60% of Sales
Inventory Purchases Budget
Jan
D) PROJECTED PURCHASES
Budgeted Cost of Goods Sold
Plus Desired Ending Inventory
Total Inventory Needed
Less Beginning Inventory
Required Inventory Purchases
Feb
Mar
Pro Forma
Stmt @3/31
240,000
66,000
306,000
0
306,000
(3)
(4)
E) SCHEDULE OF CASH PAYMENTS FOR INVENTORY PURCHASES
70% of Current Purchases
214,200
xxxxxx
30% of Prior Month Purchases
0
xxxxxx
Total Purch Cash Payments
214,200
(5)
(3) Cost of goods sold on first quarter pro forma income stmt (sum of three months).
(4) Inventory balance on March 31 pro forma balance sheet.
(5) Accounts payable balance on March 31 pro forma balance sheet ($296,300 * 30%).
Acct 2220: Chp 7 Case Study - Workpapers (Pg 2/4)
G. S&A Expense Budget
H. Schedule of Cash Payments for S&A Expenses
I. Pro Forma Data
GIVEN DATA:
Sales Commissions Percent
Supplies Expense Percent
Equipment Cost (in-place 1/1)
Equipment Salvage Value
Equip Useful Life (in Months)
5% of Sales
2% of Sales
100,000
10,000
120
G) Selling and Administrative (S&A) Expense Budget
Jan
Feb
Mar
Pro Forma
Stmt @3/31
PROJECTED S&A EXPENSES
Salary Expense
24,000
Sales Commissions 5% of Sales
20,000
Supplies Expense 2% of Sales
8,000
Utilities
1,400
Depr on Equipment (per month)
750
Rent
3,600
Miscellaneous
900
S&A Expenses before Interest
58,650
** Interest expense is computed in the cash budget - see Budget “J”
H) SCHEDULE OF CASH PAYMENTS FOR S&A EXPENSES
Salary Expense
24,000
100% Prior Month’s Sales
Commissions
0
Supplies Expense
8,000
100% Prior Month’s Utilities
0
Rent
3,600
Miscellaneous
900
Total Payments for S&A
36,500
Expenses
(6) Sales commissions payable balance on March 31 pro forma balance sheet.
(7) Utilities payable balance on March 31 pro forma balance sheet.
(8) Accumulated depreciation balance on March 31 pro forma balance sheet (sum of
monthly amounts).
(9) S&A expense on first quarter pro forma income statement (sum of three months).
(6)
(7)
(8)
(9)
Acct 2220: Chp 7 Case Study - Workpapers (Pg 3/4)
J. Cash Budget
K. Pro Forma Cash Flow Data
(J) Cash Budget
Desired Ending Cash Balance 12,000
Interest on Line of Credit
1%/month
Jan
Feb
CASH RECEIPTS
Beginning Cash Balance
0
Add Cash Receipts
100,000
Total Cash Available
100,000
CASH PAYMENTS
For Inventory Purchases
214,200
For S&A Expenses
36,500
For Interest Expense*
0
To Purchase Equipment
100,000
Total Budgeted Payments
350,700
FINANCING ACTIVITIES
Surplus (Shortage)
(250,700)
Borrow (Repay) in even 1000 263,000
Ending Cash Balance
12,300
Mar
Pro Forma
Stmt @3/31
(10)
(11)
(12)
(13)
100,000 (14)
(15)
(16)
* Interest payments: Feb. ($263,000) x .01; Mar. [($263,000 – $67,000) x .01].
(10) Cash receipts from customers—operating activities on first quarter pro forma
statement of cash flows (sum of monthly amounts).
(11) Cash payments for inventory—operating activities on first quarter pro forma
statement of cash flows (sum of monthly amounts).
(12) Cash payments for S&A expenses—operating activities on first quarter pro forma
statement of cash flows (sum of monthly amounts).
(13) Cash payments for interest expense--operating activities, first quarter pro forma
statement of cash flows and the income statement (sum of monthly amounts).
(14) Investing activities on first quarter pro forma statement of cash flows. The
investment in center equipment also appears on the March 31 pro forma balance
sheet.
(15) Financing activities, first quarter pro forma statement of cash flows and the
March 31 pro forma balance sheet (sum of monthly amounts).
(16) Cash balance on the March 31 pro forma balance sheet and the last item in the
first quarter pro forma statement of cash flows.
Check Figure Solution: Bee Gee JANUARY Financial Stmts
(L) Bee Gee Distributors
Pro Forma Income Statement
For the MONTH Ended JANUARY 31
Sales Revenue
$
400,000 From: Sales Budget (A)
Cost of Goods Sold
-240,000 From: Purch Budget (D)
Gross Margin
$
160,000
Selling and Admin. Exp.
-58,650 From: S&A Exp Budget(G)
Operating Income
$101,350
Interest Expense
-0- From: Cash Budget (J)
Net Income
$
101,350
(M) Bee Gee Distributors
Pro Forma Balance Sheet
AT JANUARY 31
Assets
Cash
Accounts Receivable
Inventory
Equipment
Accum. Depr. Equip.
Total Assets
Data Source:
$ 12,300 Cash Budget (J)
300,000 Sales Budget (A)
66,000 Purch. Budget (D)
$ 100,000
S&A Exp. Budget(G)
-750
99,250 S&A Exp. Budget(G)
$ 477,550
Liabilities
Accounts Payable
Sales Comm. Payable
Utilities Payable
Line of Credit Liability
Total Liabilities
Equity (No Common Stock here)
Retained Earnings
Total Liabilities and Equity
$
91,800 Purch. Budget (D/E)
20,000 S&A Exp. Budget(G)
1,400 S&A Exp. Budget(G)
263,000 Cash Budget (J)
376,200
$ 101,350
$ 477,550
1/31 Ending R/E
(N) Bee Gee Distributors
Pro Forma Statement of Cash Flows
For the MONTH Ended JANUARY 31
Cash Flow From Operating Activities
Cash Receipts from Customers
Cash Payments for Inventory
Cash Payments for S&A Expenses
Cash Payments for Interest Expense
Net Cash Flow from Operating Activities
$
100,000
-214,200
-36,500
-0-150,700
Cash Flow From Investing Activities
Cash Payments to Purchase Equipment
-100,000
Cash Flow From Financing Activities
Inflow from Borrowing on Line of Credit
Net Change in Cash (Agrees to Cash Balance!)
263,000
12,300
$