Please see the case study, calculate and answer 9 questions on assignment#1.
Slide 1 CNE Inc. sells computer network equipment. The early part of the year turned out to be highly profitable for CNE with record breaking sales from January through March. Exhibit A on page 3 shows the breakout of the number of units sold to CNE’s primary customers including when each customer purchased product, when the order was shipped, the number of units purchased and the price per unit. To help expedite sales CNE offered 1/10, n/30 credit terms to all of its customers. Integrative Design took advantage of these credit terms with Integrative Design paying within 10 days after the ship date of its product. Acore paid for its purchase 35 days after the ship date of its product. While Xplex paid 50% of the order amount at the time it order its product and planned on paying the remaining 50% of its order 45 days after the ship date of its product. Unfortunately, on April 10th Xplex declared bankruptcy and did not pay the remaining accounts receivable balance. To generate more operating cash flow, the company decided to rely more heavily on accounts payable. In January, all purchases for raw materials were switched from a cash basis to accounts payable with n/30 terms. Exhibit B on page 3 shows the schedule of the company’s raw material purchases by month and when CNE paid for each purchase. To remain competitive CNE expanded its output by automating its production process. On January 1st, CNE spent $1,000,000 for new robotic equipment and spent another $200,000 to have the equipment installed. The robotic equipment has a useful life up to 10 years. The salvage value of this equipment is estimated at $100,000. As a result of automating its production process, CNE was able to reduce its direct labor cost down to $75 dollars per unit. CNE financed this new equipment purchase through a combination of debt and equity. On January 1st, CNE received a $750,000 loan from a commercial bank at 6% interest. Starting on February 1st principal and interest payments of 11,055 are to be paid on a monthly basis over 7 years. Also, in January CNE issued $750,000 of common stock. In this offering, 100,000 shares were issued at a par value of $3 per share. CNE: Impacts on the Balance Sheet and Income Statement As the first quarter came to a close profits were at a record high. CNE declared a cash and stock dividend in the month of March. The cash dividend was set at $.50 cents per share and the stock dividend was set at 5% of total outstanding stock with a par value of $2 per share. Total outstanding stock at the end of March was 200,000 shares. The dividends were distributed in April. The stock was trading at $8 per share at the time the dividends were declared and distributed. Additional Assumptions: 1. Purchases for capital equipment and installation were paid for in cash in January. The capital equipment was installed on January 31st. Start depreciating the equipment in February. 2. All units are manufactured in the same month of the raw material purchase. 3. Direct Labor is paid for in cash at the end of each month. CNE: Impacts on the Balance Sheet and Income Statement Questions for Integrative Assignment #1. How much revenue did CNE Inc. record in the month of March? For the month of March how much additional accounts receivable did CNE Inc. add to its balance sheet? Assuming that the accounts receivable balance was zero at the end of January what was the ending accounts receivable balance at the end of April? How much did CNE Inc. record to its cash account in February for the sale of its product? Using the First In First Out (FIFO) method, how much Cost of Goods Sold did CNE Inc. record in the month of March? Again, assuming FIFO, if the inventory balance at the end of January was $79,875 what was the ending inventory balance at the end of April? What is the total depreciable amount of CNE Inc's. new capital equipment at the time of its purchase on January 1st? What will be the depreciation expense that CNE Inc. will record for all of year 2 using the "Double Declining" method? Again, using the "Double Declining" method, what will be the ending depreciable balance amount of this capital equipment at the end of year 3?