Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
pls do not send a picture of your hand write Kiss Co
pls do not send a picture of your hand write
Kiss Co.’s finance manager would like to apply to the bank for a new credit line and has prepared the following assumptionsfor preparing the budgets:
1) The company’s beginning cash balance on January 1 is $25,000.
2) Sales: January 80,000 units; February 100,000 units. Selling price is $5 per unit. 50% of sales are cash sales. The remaining are collected 40% in the same month, 60% in the following month.
3) Purchases: January 80,000 units; February 100,000 units. Cost per unit is $2. Purchases are paid as follows: 70% in the same month, 30% in the following month. The company sells all products purchased during a month.
4) Office administrative expenses are $80,000 per month (does not include depreciation expense) and are paid every month. Depreciation expense is budgeted at $15,000 per month
5) Shipping costs are $0.50 per unit sold. The company pays shipping costs in the month following the sale of products.
6) The company will rent a warehouse in ?zmit on February 1 st . Annual rental cost of $60,000 will be paid in cash on February 1 st .
7) Company will pay cash dividends of $50,000 in January.
8) Company has a $40,000 note payable outstanding to a bank. Annual interest on the note is 12% and company accrues and pays interest on a monthly basis. The note will be repaid in full at the end of February.
Required:
a) Prepare the Profit or Loss Budget for Kiss Co. for January and February.
b) Prepare the Cash Budget for Kiss Co. for January and February.
Expert Solution
a)Profit & loss budget for Kiss Co. for January and February
| Particulars | January | February |
| Sale units | 80,000 | 100,000 |
| Selling Price per unit($) | 5 | 5 |
| Sales Amount | 400,000 | 500,000 |
| - Expenses: | ||
| Purchases (Units*Cost per unit) |
160,000 (80,000*2) |
200,000 (100,000*2) |
| Office Administrative expenses | 80,000 | 80,000 |
| Depreciation Expense | 15,000 | 15,000 |
| Shipping Cost(sale Units *Shipping cost per unit) |
40,000 (80,000*0.5$) |
50,000 (100,000*0.5$) |
| Rental Cost(60,000/12) | - | 5,000 |
| Interest payable(40,000*12%)/12= | 400 | 400 |
| Net Income | 104,600 | 149,600 |
b)Cash Budget for Kiss Co for January & February
| Particulars | January | February | Total |
| Receipts: | |||
| Cash Sales |
200,000 (400,000*50%) |
250,000 (500,000*50%) |
|
| Credit sale Collection: | |||
| January credit sales receipts |
80,000 (400,000*50%)*40% |
120,000 (400,000*50%)*60% |
|
| February Credit Sale receipts |
- |
100,000 (500,000*50%)*40% |
|
| Total Receipts | 280,000 | 470,000 | 750,000 |
| Payments: | |||
| January Purchase payments |
112,000 (80,000*2*70%) |
48,000 (80,000*2*30%) |
160,000 |
| February Purchase Payments | - |
140,000 (100,000*2*70%) |
140,000 |
| Office Administrative expense payment | 80,000 | 80,000 | 160,000 |
| Shipping cost paid | - |
40,000 (80,000*0.5$) |
40,000 |
| Annual rental Cost | - | 60,000 | 60,000 |
| Cash Dividends | 50,000 | - | 50,000 |
| Interest Payment | 400 | 400 | 800 |
| Total Payments | 242,400 | 368,400 | 610,800 |
| (a)Excess Cash | 37,600 | 101,600 | 139,200 |
| (b)Cash at the beginning of the month | 25,000 | 62,600 | - |
| (c)Closing Cash At the end of the month(a+b) | 62,600 | 164,200 | - |
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
