Reid’s Rides sells high quality BMX bikes for $445 each. The cost to produce the bikes average $267.00 each. Depreciation expenses run $10,000 per year with selling and administrative expenses at $96,000 per year which includes rent of $2,000 per month. In 2016 they sold 795 bikes. They have the following assets, miscellaneous parts $8,955, tools, $2,600, delivery/service truck $22,000, office equipment, display racks, computers, phones equal $27,000 with an inventory of 140 bikes. The company has a five year loan. The loan amount at the start of 2016 was $70,000 with an Interest rate of 7.5%. Accumulated depreciation of $25,000. Operating Cash is $10,000, Cash in savings of 70,000. Their tax rate is 32%. Complete the following:
1. Construct in good form an Income statement
2. Calculate the profit or loss for Reid’s Rides for 2016 (Include depreciation.)
3. Calculate the breakeven amount in dollars for Reid’s Rides for 2016. (do not include depreciation) How many bikes must be sold to meet the breakeven amount?
4. How many bikes must Reid’s Rides sell to make a profit of $50,000, and $75,000?
5. Calculate the cash flow for Reid’s Rides for 2016. How much cash do they have available?
6. Reid’s Rides has the opportunity to purchase the building at a cost of $395,000. Interest on the loan would be 6% for 20 years. The bank requires a 10% down payment. a. Calculate the monthly payment. b. Real estate taxes would be $3,200 per year. How much would the payment be with taxes?
7. If he purchases the building how many bikes must Reid’s Rides sell to breakeven?
8. The owner believes sales will increase by 10% in 2017. Construct a projected income statement that illustrates the increase in sales . Can the owner afford to purchase the new building and receive a salary of $50,000? If not how many sales must be made to meet his goal?