Question

The following information from Compañía El Faro SA is presented below :

Compañía El Faro SA
Balance sheet
As of December 31, 201 9
Dollar amounts
	AMOUNTS
ASSETS
Cash	130,000
Accounts receivable	150,000
Inventories	440,000
Expenses paid in advance	58,000
Current Assets	778,000
Equipment , furniture and other	370,000
Accumulated depreciation	- 128,000
Net Fixed Assets	242,000
TOTAL ASSETS	1,020,000
PASSIVES
Accounts payable Suppliers	183,2 00
Commissions payable	25,000
Current liabilities	208,200
Long-term bank debts	200,000
TOTAL LIABILITIES	408,200
HERITAGE
Social Capital	544,800
Earnings Retained from prior periods	67,000
TOTAL ASSETS	611,800
PASSIVE AND HERITAGE	1,020,000

Sales royal December 2019 in September were $ 500,000. The budgeted monthly sales for the coming months are as follows:

	January	February	March	April	May	June	July
Sales	$ 600,000	$ 700,000	$ 500,000	$ 600,000	$ 900,000	$ 700,000	$700,000

Sales are made 70% in cash and 30% on credit that is collected in the following month. The amount of bad debts is insignificant.

The desired by the inventory COMPANY at the end of each month is as follows: a basic inventory of $ 200,000 over 4 0% of the sales of the following month.

The 60% of purchases are paid in cash and 40% in the following month.

The cost of merchandise sold is 9 5% of the desired ending inventory.

Wages and commissions are divided into two parts: $ 25,000 monthly fixed salaries and commissions l 5% sales total for the month. The commission is paid the following month , while the fixed wages are paid in the same month .

On March 1 20 20 buy ra a new truck valued at $ 30, 000, which has a shelf life of four years and a salvage value of $ 6,000. You depreciate the straight - line method is used.

Other monthly expenses are:

• Miscellaneous expenses: 8% of cash sales
• $ 20,000 rental
• $ 5,000 depreciation not including the new truck.

The company wishes to maintain a minimum cash balance of $ 100,000 to the end of each month. If needed loans , payments are made in multiples of $ 10,000. The interest rate is 12% per annum. Loans are requested on the 5th of the month they are needed and are paid on the 30th of the month that there is cash left over.

You are asked to:

1. Using the above data, prepare the following certificates:

a) Budget of sales and collections.                                                                            

b) Certificate of purchases to be made and disbursements for purchases.               

c) Certificate of salaries and commissions (Expenses and disbursements).

2. Using the data from the calculated schedules prepare the following financial statements:

a) Projected monthly cash flow for the first semester of 2020. Detailed per month.

b) Projected income statement for the first semester of 2020, detailed for each one of the months from January to June .

c) Projected balance sheet for June 30, 20 20 .

3. Make a general comment on the prepared financial projections and on the future financial situation of the company . Use at least one of the financial analysis tools learned throughout the course : Vertical, Horizontal Analysis, State of Origin and Application of Funds , Financial Indicators.

Answer 1

Answer a)

	Budget of sales
Particulars	January	February	March	April	May	June	July
Sales	$600,000	$700,000	$500,000	$600,000	$900,000	$700,000	$700,000
	Budget of Collection
	January	February	March	April	May	June	July
70% of Current month sale	$420,000.0	$490,000.0	$350,000.0	$420,000.0	$630,000.0	$490,000.0	$490,000.0
30% of previous month sale	$150,000	$180,000.0	$210,000.0	$150,000.0	$180,000.0	$270,000.0	$210,000.0
Total Cash collection	$570,000.0	$670,000.0	$560,000.0	$570,000.0	$810,000.0	$760,000.0	$700,000.0
Answer b)	Purchases to be made
	January	February	March	April	May	June	July
Basic inventory	$200,000	$200,000	$200,000	$200,000	$200,000	$200,000	$200,000
40% of following month sales	$240,000.0	$280,000.0	$200,000.0	$240,000.0	$360,000.0	$280,000.0	$280,000.0
Total inventory at the end of month	$440,000	$480,000	$400,000	$440,000	$560,000	$480,000	$480,000
	Disbursements for purchases
	January	February	March	April	May	June	July
60% in cash of current month	$264,000.00	$288,000.00	$240,000.00	$264,000.00	$336,000.00	$288,000.00	$288,000.00
40% of previous month	$112,000	$176,000.0	$192,000.0	$160,000.0	$176,000.0	$224,000.0	$192,000.0
Total cash Purchase	$376,000	$464,000	$432,000	$424,000	$512,000	$512,000	$480,000
Answer c)	Salaries and Commission payable
	January	February	March	April	May	June	July
Fixed Salary	$25,000	$25,000	$25,000	$25,000	$25,000	$25,000	$25,000
Commission	$30,000.00	$35,000.00	$25,000.00	$30,000.00	$45,000.00	$35,000.00	$35,000.00
Total commission payable	$55,000	$60,000	$50,000	$55,000	$70,000	$60,000	$60,000
	Salaries and Commission paid
	January	February	March	April	May	June	July
Fixed Salary	$25,000	$25,000	$25,000	$25,000	$25,000	$25,000	$25,000
Commission of previous month	$25,000	$30,000.00	$35,000.00	$25,000.00	$30,000.00	$45,000.00	$35,000.00
Total salary and commission paid	$50,000	$55,000	$60,000	$50,000	$55,000	$70,000	$60,000
Answer a)	Projected monthly cash flow for the first semester of 2020.
	January	February	March	April	May	June	July
Inflows
Collection from debtor	$150,000	$180,000	$210,000	$150,000	$180,000	$270,000	$210,000
Cash Sales	$420,000.0	$490,000.0	$350,000.0	$420,000.0	$630,000.0	$490,000.0	$490,000.0
Total Inflows	$570,000	$670,000	$560,000	$570,000	$810,000	$760,000	$700,000
Outflows
Cost of merchandise (95% of inventory)	$440,000	$480,000	$400,000	$440,000	$560,000	$480,000	$480,000
Salary and Commission	$50,000	$55,000	$60,000	$50,000	$55,000	$70,000	$60,000
Misscellaneous expenses( 8% of cash sales)	$33,600.00	$39,200.00	$28,000.00	$33,600.00	$50,400.00	$39,200.00	$39,200.00
Rent	$20,000	$20,000	$20,000	$20,000	$20,000	$20,000	$20,000
Truck	$30,000
Total Outflows	$573,600	$594,200	$508,000	$543,600	$685,400	$609,200	$599,200
Closing cash	($3,600)	$75,800	$52,000	$26,400	$124,600	$150,800	$100,800
Minimum cash	$100,000	$100,000	$100,000	$100,000	$100,000	$100,000	$100,000
Loan required	($103,600)	($24,200)	($48,000)	($73,600)	$0	$0	$0
Closing cash	$100,000	$100,000	$100,000	$100,000	$124,600	$150,800	$100,800

As per policy we need to answer only 4 sub parts if you have any doubt let me know in comment section.