Prepare A Master Budget Wallaby Kite Company, a small Melbourne firm that sells kites on the web, wants a master budget for the 3 months beginning January 1, 2013. It desires an ending minimum cash balance of $20,000 each month. Sales are forecasted at an average wholesale selling price of $8 per kite. Merchandise costs average $4 per kite. All sales are on credit, payable within 30 days, but experience has shown that 60% of current sales are collected in the current month, 30% in the next month , and 10% in the month thereafter. Bad debts are negligible. In January, Wallaby kite is beginning just-in-time (JIT) deliveries from suppliers, which means that purchases will equal expected sales. On January 1, purchases will cease until inventory decreases to $24,000, after which time purchases will equal sales. Purchases during any given month are paid in full during the following month. Monthly operating expenses are as follows: Wages and salaries $60,000 Insurance expired 500 Depreciation 1,000 Miscellaneous 10,000 Rent $1,000/month + 10% of quarterly sales over $40,000 Cash dividends of $6,000 are to be paid quarterly, beginning January 15, and are declared on the fifteenth of the previous month. All operating expenses are paid incurred, except insurance, depreciation, and rent. Rent of $1,000 is paid at the beginning of each month, and the additional 10% of sales is settled quarterly on the tenth of the month following the end of the quarter. The next rent settlement date is January 10. The company plans to buy some new fixtures for $12,000 cash in March. Money can be borrowed and repaid in multiples of $2,000. Management wants to minimize borrowed and repay rapidly. Simple interest of 10% per annum is computed monthly but paid when the principal is repaid. Assume that borrowing occurs at the beginning, and repayments at the end of the months in question. Compute interest to the nearest dollar. Assets as of December 31, 2012 Cash $20,000 Accounts Receivable 50,000 Inventory 156,200 Unexpired Insurance 6,000 Fixed assets, net 50,000 Total 282,200 Liabilities and Equities as of December 31,2012 Accounts payable $142,200 (Merchandise) Dividends payable 6,000 Rent payable 31,200
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