GrowMaster Products, a rapidly growing distributor of home

Affordable Essays

GrowMaster Products, a rapidly growing distributor of home
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.

We can offer a similar ASSIGNMENT at a reasonable price. All our papers are written from the scratch and 100% plagiarism free.