CHAPTER 8 GRADED HOMEWORK

(please prepare this problem in excel and print the solution and the cell formulas)

HW CH 8
The Navarro Company is a whole sale distributor of household goods that operates in
Connecticut. Their Balance Sheet is given below:

Navarro Company

Balance Sheet

December 31, 2008

Cash $ 6,000 Accounts Payable $ 32,550

Accounts Receivable 36,000

Inventory 9,800 Capital Stock 100,000

Building and Equip (net) 110,885 Retained Earnings 30,135

Total Assets 162,685 Total Liab and Owners Equity 162,685

Information relating to Navarro follows

1. Gross profit is 30% of sales.

2. Budgeted sales revenue

December $60,000 February $80,000 April $55,000

January $70,000 March $85,000

3. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month
following the sale.
4. At the end of the month the inventory is to be 20% of the following month’s cost of
goods sold.
5. One forth of the month’s inventory purchases are paid for in the following month.
6. The monthly expenses are
Salaries and wages $12,000

Rent $1800
 Other expenses 8% of sales (excludes depreciation)

Depreciation is $ 2,400 for the quarter and includes that for the new assets.

7. In January equipment costing $3000 will be acquired for cash and more equipment is
purchased in February for $8000.
8. The company maintains a minimum balance of $5000. They have an open line of
credit with the bank. All borrowing is done at the beginning of the month and repaid
at the end of the month.. Borrowing is done in multiples of $1000.
9. The interest rate is 12%. Interest is paid only at the time of repayment. Compute
interest in whole months (1/12, 2/12..etc.)
REQUIRED:

1. Prepare a cash budget for each month of the first quarter.

2. Prepare an income statement for the quarter.
3. Prepare a balance sheet for the quarter.
4. Prepare a statement of cash flows (indirect method) for the quarter.