FIN – Mayflower Nursery’s projected sales for the period

FIN – Mayflower Nursery’s projected sales for the period

Question
	Mayflower Nursery's projected sales for the period February through September are shown below. Of Mayflower's sales, 25% are for cash,
the remaining 75% are collected in the month following sale. Mayflower purchases its stock 1 month prior to the month of sale. Suppliers
offer a substantial discount for cash purchases, so Mayflower pays for its merchandise by EFT at the time of purchase. Purchases average
65% of sales and fixed costs average $35,000 per month. Taxes amounting to 6.5% of the preceding 3 months' sales must be paid at the
end of May (for March, April and May) and the end of August(for June, July and August).
 
Mayflower's policy is to keep a minimum of $15,000 cash on hand in case of unforeseen cash demands or to take advantage of exceptional
opportunities. The company has negotiated a line of credit with its bank which allows it to borrow at an annual percentage rate of 6%
Money is borrowed at the end of the month preceding the month in which it will be needed and interest is paid at the end
of the following month. Mayflower's cash balance at the end of February was $18,000.
Sales

February
 110,000.00

March
 175,000.00

April
 190,000.00

May
 180,000.00

June
 150,000.00

July
 140,000.00

August
 125,000.00

1. 30% Construct a cash budget for the months of March through September. Use the format on page 561 of the text or the solution
to problem 17­12 in the class notes on Blackboard .
2. 20% Use your budget to calculate the following amounts for the period March through August.
a. Sales Revenue
b. Cost of Goods Sold
c. Gross Profit
d. Cash Balance, Sept. 1
e. Accounts Receivable, September 1.

September
 100,000.00