Question

Ponpon produces cans of jelly. The company would like to purchase a canning machine. The machine costs $25,000 and the company needs a loan to make the purchase. Before agreeing to the loan, their bank requires Ponpon to provide both current (2020) and budgeted (3 months in 2021) financial statements.

Use the following information from Ponpon to provide the bankers with the 2021 budgeted financial states.

Balance Sheet

Cash                                        $50,000   

Accounts Receivable               $31,000   

Inventory                                $12,000

Fixed Assets                            $37,000

Total Assets                            $130,000

Accounts Payable                   $22,500

Accrued Credit Fees               $9,200

Common Stock                        $46,800

Retained Earnings                   $$51,500

Total Liabilities & Equity         $130,000

2021 Sales Forecast

January            $74,000

February          $82,000

March              $58,000

April                $54,000

May                 $80,000

June                 $67,000

July                  $70,500

Additional Info:

1. Ponpon only accepts credit cards when selling their jelly. Ponpon collects 35% of the sales on account in the month of the sale and 65% in the month after the sale.
2. Unfortunately, the credit card companies pass along a 6.2% sales fee to Ponpon for the convenience and safety of their transactions on account. The sales fee is due one month after the sale.
3. The cost of sales is 42% of (current month) sales.
4. Ponpon maintains an inventory at all times at the sales requirements (COS) for the months’ budgeted sales. This provides assurance that they won’t run out of jelly.
5. Ponpon uses a credit card for all their purchases. The company pays off their credit card balance in full the following month.
6. Ponpon pays 5% of sales each month to Jako Co. for the CEO’s security service.
7. In addition to the carriable security cost, Ponpon incurs fixed expenses of $22,000 per month, $1500 of which is for depreciation of fixed assets.

1. Complete the budget spreadsheet for Ponpon

  Cash Budget

January            February           March             April         May

      Beginning Balance:                           

Plus, cash receipts from sales:

Cash from Dec Sales

Cash from Jan Sales     $74,000

Cash from Feb Sales    $82,000

Cash from Mar Sales  $58,000

Cash from Apr Sales    $54,000

Cash from May Sales  $80,000

Cash from Jun Sales     $67,000      

Plus: Total Cash Receipts                                                                                                            

Cash Expenditures

Inventory Purchases

Variable Costs  (mgmt. fee)

Credit Card Fees

Fixed Expenses

Total Cash Expenditures

Ending Cash Balance

Answer 1

Budget

Formulas

Ponpon
Cash Budget
	Sales	January	February	March	April	May
Beginning Balance		50000	=C20	=D20	=E20	=F20
Plus, cash receipts from sales
Cash from Dec Sales		31000
Cash from Jan Sales	74000	=B7*35%	=B7-C7
Cash from Feb Sales	82000		=B8*35%	=B8-D8
Cash from Mar Sales	58000			=B9*35%	=B9-E9
Cash from Apr Sales	54000				=B10*35%	=B10-F10
Cash from May Sales	80000					=B11*35%
Cash from Jun Sales	67000
Plus: Total Cash Receipts		=SUM(C6:C12)	=SUM(D6:D12)	=SUM(E6:E12)	=SUM(F6:F12)	=SUM(G6:G12)
Cash Expenditures
Inventory Purchases		22500	=B7*42%	=B8*42%	=B9*42%	=B10*42%
Variable Costs (mgmt. fee)		=B7*5%	=B8*5%	=B9*5%	=B10*5%	=B11*5%
Credit Card Fees		9200	=B7*6.2%	=B8*6.2%	=B9*6.2%	=B10*6.2%
Fixed Expenses		=22000-1500	=C18	=D18	=E18	=F18
Total Cash Expenditures		=SUM(C15:C18)	=SUM(D15:D18)	=SUM(E15:E18)	=SUM(F15:F18)	=SUM(G15:G18)
Ending Cash Balance		=C4+C13-C19	=D4+D13-D19	=E4+E13-E19	=F4+F13-F19	=G4+G13-G19