Assignment: Ducker Industries' projected sales for the first six months of 2004 are given below:
Table:
Jan. $200,000 April $400,000
Feb. $240,000 May $320,000
March $280,000 June $320,000
- 25% of sales is collected in cash at the time of the sale, 50% is collected in the month following the sale, and the remaining 25% is collected in the second month following the sale.
- Cost of goods sold is 75% of sales.
- Purchases are made in the month prior to the sale, and payments for purchases are made in the month of the sale.
- Total other cash expenses are $60,000/month.
- The company's cash balance as of February 28, 2004 will be $40,000. Excess cash will be used to retire short-term borrowing (if any).
- Ducker has no short-term borrowing as of February 28, 2004.
- Assume that the interest rate on short-term borrowing is 1% per month.
- The company must have a minimum cash balance of $25,000 at the beginning of each month.
- Round all Answers to the nearest $100.
a) Prepare a cash budget for Ducker and highlight (using color, borders or bold) the following:
total cash receipts (collections) for April 2004
total disbursement in May (not including interest on short-term borrowing)
ending cash balance (before borrowing) in March
projected cumulative short-term borrowing as of April 30, 2004
when Ducker pays off its short-term borrowing
b) Prepare a simple income statement and highlight (using color, borders or bold) Ducker's EBIT for March 2004