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Ducker Industries' projected sales for the first six months

Ducker Industries' projected sales for the first six months of 2004 are given below:
Table 1

Jan. $200,000 April $400,000
Feb. $240,000 May $320,000
March $280,000 June $320,000

? 25% of sales is collected in cash at the time of the sale, 50% is collected in the month following the sale, and the remaining 25% is collected in the second month following the sale.

? Cost of goods sold is 75% of sales.

? Purchases are made in the month prior to the sale, and payments for purchases are made in the month of the sale.

? Total other cash expenses are $60,000/month.

? The company's cash balance as of February 28, 2004 will be $40,000. Excess cash will be used to retire short-term borrowing (if any).

? Ducker has no short-term borrowing as of February 28, 2004.

? Assume that the interest rate on short-term borrowing is 1% per month.

? The company must have a minimum cash balance of $25,000 at the beginning of each
month.

? Round all Answers to the nearest $100.

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a) Prepare a cash budget for Ducker and highlight (using color, borders or bold) the following:

 total cash receipts (collections) for April 2004
 total disbursement in May (not including interest on short-term borrowing)
 ending cash balance (before borrowing) in March
 projected cumulative short-term borrowing as of April 30, 2004
 when Ducker pays off its short-term borrowing

b) Prepare a simple income statement and highlight (using color, borders or bold) Ducker's EBIT for March 2004

Solution Summary

The solution examines Ducker Industries projected sales for the first six months.

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