The management of Rapid Hardware financial position statement.
This is an assignment that discusses the management of Rapid Hardware financial position statement. The paper also offers a brief of its statement as of 31st March.
The management of Rapid Hardware financial position statement
INSTRUCTION: Answer all questions
The management of Rapid Hardware has asked you to prepare a master budget for the months of April, May and June 2018 for the entity using the following information.
Statement of Financial Position as at 31 March 2018
ASSETS Cost ($) Depreeciation ($) Net book value ($)
Equipment 480,000 90,000 390,000
Current assets
Inventory 126,000
Accounts Reveivable 175,000
Cash 50,000 351,000
741,000
LIABILITIES $ SHAREHOLDERS’ EQUITY
Equity
Ordinary shares 235,000
Retained Earnings 138,000 373,000
Non-current Liabilities
Long-term note payable 200,000
Current liabilities
Accounts payable 156,000
short-term notes payable 12,000 368,000
741,000
The management of Rapid Hardware financial position statement
The following details were also available:
a. Firstly, actual units of sales for March were 10,000 units and each month’s sales are expected to exceed the prior month’s results by 5%. The selling price for each unit is $25.00
b. Secondly, the policy of Rapid Hardware for ending inventory of a given month is to be equal to 80% of the next month’s expected sales. Subsequently, the March 31 inventory was 8,400 units based on this policy.
c. Thirdly, sales representatives’ commissions are 12.5/5 and they are payable in the month of the sales. The manager’s salaries will be $3,500 in April and $4,000 for each month thereafter.
d. Fourthly, the general and administrative expenses include administrative salaries of $8,000 per month, depreciation of $5,000 per month and also 0.9% monthly interest on the long term note payable.
f. Also, all purchases are on credit and no payable arise from any other transactions. Purchases are payable in the next month. Also, the purchase price is $15 per unit.
g. Consequently, the minimum ending cash balance for all the months is $50,000 and if necessary, the company will borrow enough cash to reach this target. Additionally, the short-term notes will require an interest payment of 1% at the end of each month. If the ending cash balance exceeds the minimum, also the excess will be applied to repaying the short-term notes payable.
h. Then, dividends of $100,000 are to be declared and paid in May.
i. Lastly, no cash payments for income taxes are to be made during the second quarter.
Master budget
Additionally, you are to prepare the following budgets and other financial information in order to assist you to complete the master budget:
1. Sales budget, including that for July
2. The purchases budget to include the budgeted cost of goods sold for each month and the quarter and also the cost of the June 30 budgeted inventory
3. The selling expense budget
4. The general and administrative expense budget
5. The budget for expected cash receipts from customers and also the expected June 30 accounts receivable balance
6. The budget for expected cash payments for purchases and also the expected June 30 balance for accounts payable
7. The cash budget for the quarter
8. Lastly, the budgeted retained earnings statement
The management of Rapid Hardware financial position statement
