Victoria Kite Company Master Budget

Victoria Kite Company, a small Melbourne firm that sells kites on the web, wants a master budget for three months beginning January 1, 2008. It desires an ending minimum cash balance of $5,000.00 each month. Sales are forecasted at an average wholesale selling price of $8.00 per kite. Merchandise costs$4.00 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, Victoria Kite is beginning just-in-time (JIT) deliveries from suppliers, which means that purchases will equal expected sales. On January 1, purchases will ceases until inventory decreases to $6,000.00, 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 $15,000
Insurance expired 125
Depreciation 250
Miscellaneous 2500
Rent $250/month + 1-% of quarterly sales over $10,000

Cash dividends of $1,500 are to be paid quarterly, beginning January 15, and are declared on the fifteenth of the previous month. All operating expenses are paid as incurred, except insurance, depreciation, and rent. Rent of $250.00 is paid at the beginning of each month, and the additional 10% of sales is paid 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 $3,000.00 cash in March. Money can be borrowed and repaid in multiples of $500.00 at an interest rate of 10% per annum. Management wants to minimize borrowing and repay rapidly. Interest is compounded monthly but paid when the principle is repaid. Assume the borrowing occurs at the beginning, and repayments at the end of the month in question. Compute interest to the nearest dollar.

Assets as of December 31, 2007 Liabilities as of December 31, 2007

Cash $5,000 Accounts Payable (merchandise)
Accounts Receivable 12,500 $35,550
Inventory * 39,050 Dividends Payable 1,500
Unexpired Insurance 1,500 Rent Payable 7,800
Fixed Assets, net 12,500 $44,850
$70,550

*November 30 inventory balance = $16,000

Recent and Forecasted Sales:
October $38,000 December $25,000 February $70,000 April $45,000
November 25,000 January 62,000 March 38,000

1. Prepare a Master Budget including a budgeted income statement, balance sheet, cash budget, and supporting schedules for the months January through March 2008.
2. Explain why there is a need for a bank loan and what operating sources provide the cash for the repayment of the bank loan.

Assisting is needed in building the master budget that includes schedules A, B, C, D, E and F using the excel template attached and answering questions 1 and 2