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BMAL/530 BMAL530 BMAL 530 Module 8 EXCEL PROJECT

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BMAL 530 MODULE 8 EXCEL PROJECT Assume ABC Company has asked you to not only prepare their 2015 year-end Balance Sheet but to also provide pro-forma financial statements for 2016. In addition, they have asked you to evaluate their company based on the pro-forma statements with regard to ratios. They also want you to evaluate 3projects they are considering. Their information is as follows: End of the year information: Account 12/31/15 Ending Balance Cash 50,000 Accounts Receivable 175,000 Inventory 126,00 Equipment 480,000 Accumulated Depreciation 90,000 Accounts Payable 156,000 Short-term Notes Payable 12,000 Long-term Notes Payable 200,000 Common Stock 235,000 Retained Earnings solve Additional Information: • Sales for December total 10,000 units. Each month’s sales are expected to exceed the prior month’s results by 5%. The product’s selling price is $25 per unit. • Company policy calls for a given month’s ending inventory to equal 80% of the next month’s expected unit sales. The December 31 2015inventory is 8,400 units, which complies with the policy. The purchase price is $15 per unit. • Sales representatives’ commissions are 12.5% of sales and are paid in the month of the sales. The sales manager’s monthly salary will be $3,500 in January and $4,000 per month thereafter. • Monthly general and administrative expenses include $8,000 administrative salaries, $5,000 depreciation, and 0.9% monthly interest on the long-term note payable. • The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of sale). • All merchandise purchases are on credit, and no payables arise from any other transactions. One month’s purchases are fully paid in the next month.   • The minimum ending cash balance for all months is $50,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance. • Dividends of $100,000 are to be declared and paid in February. • No cash payments for income taxes are to be made during the first calendar quarter. Income taxes will be assessed at 35% in the quarter. • Equipment purchases of $55,000 are scheduled for March. ABC Company’s management is also considering 3 new projects consisting of the purchase of new equipment. The company has limited resources, and may not be able to complete make all 3purchases. The information is as follows for the purchases below. Project 1 Project 2 Project 3 Purchase Price $80,000 $175,000 $22,700 Required Rate of Return 6% 8% 12% Time Period 3 years 5 years 2 years Cash Flows – Year 1 $48,000 $85,000 $15,000 Cash Flows – Year 2 $36,000 $74,000 $12,000 Cash Flows – Year 3 $22,000 $38,000 N/A Cash Flows – Year 4 N/A $26,800 N/A Cash Flows – Year 5 N/A $19,000 N/A   Required Action: Part A: • Prepare the year-end balance sheet for 2015. Be sure to use proper headings. • Prepare budgets such that the pro-forma financial statements for the first quarter of 2016 may be prepared. • Sales budget, including budgeted sales for April. • Purchases budget, the budgeted cost of goods sold for each month and quarter, and the cost of the March 31 budgeted inventory. • Selling expense budget. • General and administrative expense budget. • Expected cash receipts from customers and the expected March 31 balance of accounts receivable. • Expected cash payments for purchases and the expected March 31 balance of accounts payable. • Cash budget. • Budgeted incom

BMAL/530 BMAL530 BMAL 530 Module 8 EXCEL PROJECT

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