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Preparation of cash budget. Sam and Suzy Sizeman need to prepare a cash budget for the last quarter of 2020 to make sure they can cover their expenditures during the period. Sam and Suzy have been preparing budgets for the past several years and have been able to identify the percentage of their income that they pay for most of for their cash outflows. These percentages are based on their take-home pay (e.g., monthly utilities normally run 5.2% of monthly take-home pay). The information here can be used to create their fourth-quarter budget for 2020. a. Prepare a quarterly cash budget for Sam and Suzy covering the months October through December 2020. b. Are there individual months that incur a deficit? c. What is the cumulative cash surplus or deficit by the end of December 2020? Income Monthly take-home pay $4,947 Expenses Housing Utilities 30.2% Food Transportation Medical/dental Clothing for October \& November Clothing for December Property taxes (November only) Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.54 million. Interest expense is expected to remain unchanged at $40,000, and the firm plans to pay $65,000 in cash dividends during 2020. Metroline Manufacturing's income statement for the year ended December 31,2019 , is given , along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components. a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020. b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2020. c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of 2020 income? Explain why. Preparation of cash budget. Sam and Suzy Sizeman need to prepare a cash budget for the last quarter of 2020 to make sure they can cover their expenditures during the period. Sam and Suzy have been preparing budgets for the past several years and have been able to identify the percentage of their income that they pay for most of for their cash outflows. These percentages are based on their take-home pay (e.g., monthly utilities normally run 5.2% of monthly take-home pay). The information here can be used to create their fourth-quarter budget for 2020. a. Prepare a quarterly cash budget for Sam and Suzy covering the months October through December 2020. b. Are there individual months that incur a deficit? c. What is the cumulative cash surplus or deficit by the end of December 2020? Income Monthly take-home pay $4,947 Expenses Housing Utilities 30.2% Food Transportation Medical/dental Clothing for October \& November Clothing for December Property taxes (November only) Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.54 million. Interest expense is expected to remain unchanged at $40,000, and the firm plans to pay $65,000 in cash dividends during 2020. Metroline Manufacturing's income statement for the year ended December 31,2019 , is given , along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components. a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020. b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2020. c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of 2020 income? Explain why
