Homework answers / question archive / Estimate cash flows in each of the months, and make a balance sheet and an income statement QUESTIONS TO BE ANSWERED (based on following info) 1

Estimate cash flows in each of the months, and make a balance sheet and an income statement QUESTIONS TO BE ANSWERED (based on following info) 1

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Estimate cash flows in each of the months, and make a balance sheet and an income statement

QUESTIONS TO BE ANSWERED (based on following info)

1.) Estimate cash flows in each of the months
2.) Does the Company need to borrow money in any of the months
3.) Make a balance sheet as of the end of March and an income statement for the first three months. Assume that the company borrows cash at an interest rate of 1% per month to make up for any shortage of cash.
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Balance sheet January 1, 2001
Assets Liabilities & Equities
Cash $ 10,000.00 AP $ 3,000.00
AR $ 20,000.00 Long-Term Debt $ 50,000.00
Inventory $ 30,000.00
Total Current Assets $ 60,000.00 Total Liabilities $ 53,000.00

Fixed Assets $ 200,000.00 Common Stock at Par $ 10,000.00
Accumulated Depreciation $ (90,000.00) Additional Paid in $ 20,000.00
Retained Earnings $ 87,000.00

Total Assets $ 170,000.00 Total Assets $ 170,000.00

The company expects to collect the beginning balance of accounts receivable in January. In general 30% of the companies sales are on a cash basis. Of the credit sales 40% are paid in the following month, and 60% are paid in the second month after the sale.

The accounts payable at the beginning of the year must be paid in January. All materials are purchased on credit and paid for in the following month.

The long term debt has an annual interest rate of 12%. Interest payments of 1% of the principal are made each month. The long term debt is not due for another five years.

Euguene brewing company makes two different types of beer, an ale and a porter. The ale is a lighter beer that requires fewer ingredients than does the darker and heavier porter. The input requirements for a case of beer for each type of beer follow:

for making ale

Material Qty. per case Cost
Hops 5lb $ 0.30 /lb
Yeast 1oz $ 0.10 /oz
Sugar 0.5lb $ 0.40 /lb
Bottles 24 $ 0.05 /bottle

for making porter

Material Qty. per case Cost
Hops 10lb $ 0.30 /lb
Yeast 1oz $ 0.10 /oz
Sugar .8lb $ 0.40 /lb
Bottles 24 $ 0.05 /bottle
Labor 0.2 $ 10.00

The labor to make a case of beer is the same for each type of beer, 0.20 hours at $10/ hour. Labor is paid in the month earned.

Monthly over head expenses are paid in the month incurred and expected to be as follows:

OVERHEAD
Cost
Electricity $ 2,000.00
Indirect Labor $20,000.00
Rent $ 5,000.00
Depreciation $ 2,000.00

Ale sells for $10 per case and porter sells for $12 per case. Estimated sales (in cases) for Eugene Brewing are as follows:
Ale (in cases)
January 3000
February 3000
March 4000
April 2000

Porter (in cases)
January 4000
February 5000
March 3000
April 2000

The beginning inventory includes 2,000 cases of ale and 3,000 cases of porter. The company prefers to have inventory at the end o each month equal to the expected sales in the next month. Euguene Brewing uses a FIFO method of costing inventory.

The company must buy a new bottling machine for $20,000 at the end of January