Xacc 280 Week 2 Mini Case
Assumptions * Assume fiscal year begins July 1 * Personal savings account of $15,000 and added family money gives him an investment fund of $35,000. The $15,000 personal savings is included in the total investment fund. * Acceptable to base pro forma estimates off of 1956 data. * The property, including the two plants, can be assumed as Plant & Equipment, and given the appraised value of $200,000. * Assume that this P&E will not need major repair in the near future * Depreciation is given for 1956 at $24,000 per year, or $2,000 per month(Exhibit 3). However, I will assume that the property has a longer useful life than around 8 years, and will depreciate the property with a useful life of close to 17 years, given a yearly depreciation amount of $12,000 and a monthly depreciation amount of $1,000. As long as the equipment is kept in excellent repair, as it has been, 17 year useful life is a reasonable assumption
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The remaining 1/3 of yearly production will take place in July and October. * As production only accounts for 50% of production capacity, I will assume no additional capital expenditures in the near future * Assume that farmer’s were paid upon delivery at prevailing market prices * Assume that normal practice was to sell entire season’s pack before next canning season, thus keeping inventory low * Assume sales breakdown as follows: (Jul-Oct: 50%); (Nov-Dec: 20%); (Jan-Jun: 30% evenly throughout) * Assume A/R as net 30-day term, with bad-debt losses
The remaining 1/3 of yearly production will take place in July and October. * As production only accounts for 50% of production capacity, I will assume no additional capital expenditures in the near future * Assume that farmer’s were paid upon delivery at prevailing market prices * Assume that normal practice was to sell entire season’s pack before next canning season, thus keeping inventory low * Assume sales breakdown as follows: (Jul-Oct: 50%); (Nov-Dec: 20%); (Jan-Jun: 30% evenly throughout) * Assume A/R as net 30-day term, with bad-debt losses