Purchase Solution

Cash Budget/Percentage of sales method

Not what you're looking for?

Ask Custom Question

II- Cash Flow and Financial Planning:

A- Gerry Jacobs, a financial analyst for Best Value Supermarkets, has prepared the following sales and cash disbursement estimates for the period August through December of the current year.

Month Sales Cash Disbursements
August $400 $300
September 500 500
October 500 700
November 600 400
December 700 500

90 percent of sales are for cash, the remaining 10 percent are collected one month later. All disbursements are on a cash basis. The firm wishes to maintain a minimum cash balance of $50. The beginning cash balance in September is $25. Prepare a cash budget for the months of October, November, and December, noting any needed financing or excess cash available. (40 ptos)

B- Pro-forma Income Statement:

Income Statement

Huddleston Manufacturing Company
For the Year Ended December 31, 2005

Sales $2,800,000
Less: Cost of goods sold 1,820,000
Gross profits $ 980,000
Less: Operating expenses 240,000
Operating Profits $ 740,000
Less: Interest expense 70,000
Net profits before taxes $ 670,000
Less: Taxes (40%) 268,000
Net profits after taxes $ 402,000
Less: Cash Dividends 132,000
To: Retained earnings $ 270,000

Huddleston Manufacturing estimates its sales in 2006 will be $3 million. Interest expense is expected to remain unchanged at $70,000, and the firm plans to pay cash dividends of $140,000 during 2006. Use the percent of sales method to prepare a pro forma income statement for the year ended December 31, 2006, based on the 2005 income statement shown above.

Purchase this Solution

Solution Summary

The solution explains how to prepare a cash budget and use the percentage of sales method to prepare a proforma income statement

Purchase this Solution

Free BrainMass Quizzes
Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.