Re: Plate is a not-for-profit grocery store that buys unused edible food from restaurants and forprofit grocery stores and sells the food at below-market prices. It also offers cooking classes for a fee throughout the year. Its fiscal year (FY) is January 1–December 31. The following apply to FY 2020:
1. Re: Plate will begin the year with $21,000 in cash.
2. Re: Plate plans to buy 1 million pounds of food at $1.25 per pound in cash throughout the year. (Use “Food” as the line item in the budgets.)
3. Re: Plate expects to sell all its 1 million pounds of food in inventory it acquires throughout the year, at an average price of $1.65 per pound. (Use “Grocery sales” as the line item in the budgets.)
4. Re: Plate plans to offer three cooking classes per week throughout the year. Each class will have 10 participants, each of whom will pay a $25 fee. (Use “Class fees” as the line item in the budgets.)
5. Re: Plate will pay $10,000 per month in rent, up from $9,500 per month in FY 2019. Rent will be $10,500 per month in FY 2021 Re: Plate pays rent 1 month in advance.
6. Re: Plate’s total payroll will be $210,000 in salaries, up from $180,000 in FY 2019. In addition to salary, Re: Plate’s employees are paid benefits valued at 40 percent of their salaries. The benefits rate will be unchanged from FY 2019. Employees are paid monthly with a 1-month lag. (Use “Salaries and benefits” as the line item in the budgets.)
7. Re: Plate will take out a $40,000 loan July 1. The loan will have an annual interest rate of 2 percent. An interest payment and a principal repayment of $10,000 will be due December 31.
8. Re: Plate will use the loan to purchase a new forklift that will have a useful life of 10 years and a salvage value of $5,000. Re: Plate also owns computer equipment it purchased in 2018 for $50,000; the equipment has no salvage value and a useful life of 5 years. Prepare an annual operating budget and a semiannual cash budget (showing the first half of the year, the second half of the year, and annual amounts in three side-by-side columns) for Re: Plate for FY 2020. Interest expense and depreciation expense are further discussed in Chapters 5 and 10, respectively.