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Budget Planning Following is selected information relating to the operations of Pocketchange Company, a tile distrib September 30, 2021 - Trial Balance information 68000 Cash $ 8,500 Accounts receivable...................... 24,800 Inventory. 40,800 Plant and equipment, net of Acc. Dep. 428,600 Accounts payable.. 24,650 Capital stock........... 150,000 Retained earnings. 328,050 $ 502.700 $ 502.700 a. Actual and budgeted sales data: September (actual) $ 62,000 October.... 68,000 November 81,000 December 94,000 January......... 48,000 b. Gross profit is 25% of sales (or 75% Cost of Goods Sold %). C. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at September 30 are a result of the September's credit sales. d. At the end of each month, inventory on hand is to be equal to 80% of the following month's sales needs, stated at cost. e. One-half of a month's inventory purchases is paid in the month of purchase; the other half is paid in the following month. The accounts payable at September 30 are a result of September purchases of inventory. f. Monthly expenses are as follows; salaries and wages, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $1,300 per month (includes depreciation on new assets). g. Equipment costing $7,000 will be purchased for cash in the October and another $4,000 in Nov h. The company must maintain a minimum cash balance of $5,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month; borrowing and repayments must be made in mult of $1,000. The annual interest rate is 12%. Interest is paid only at the time of repayment of princi figure interest on the whole month (2/12, 3/12, and so forth). Any unpaid interest is accrued ples at the end of the quarter. Required: Using the data above: NAME SALES 81000 94000 243000 1. Complete the following schedule: Schedule of Expected Cash Collections Oct. Nov. Dec. Quarter Cash sales 40,800 Credit sales 24,800 Total collections. $ 65,600 2. Complete the following: Inventory Purchases Budget Oct. Nov. Dec. Quarter Budgeted cost of goods sold. $ 51,000 60,750 Add: Desired ending inventory. 48,600 Total needs. 99,600 Less: Beginning inventory. 40.800 Required purchases....... 58,800 + Oct. Sales X 75% cost ratio = $ ++ Nov. Sales X 75% cost ratio X 80% = $ Schedule of Expected Cash Disbursements-Purchases Oct. Nov. Dec. Quarter Sept.purchases. $ 24,650 24,650 Oct. purchases. 29,400 29,400 58,800 Nov. purchases. Dec. purchases...... Total disbursements for purchases........ 54,050 3. Complete the following: Schedule of Expected Cash Disbursements-Operating Expenses Oct. Nov. Dec. Quarter Salaries and wages. 8,160 Rent....... 2,500 Other expenses. 4,080 Total disbursements. 14,740 4. Complete the following cash budget: Cash Budget (Cash Receipts and Disbursements) Oct. Nov. Dec. Quarter Cash balance, beginning...... 8,500 Add: cash collections. 65.600 Total cash available. 74.100 Less: Cash disbursements. For inventory. 54,050 For expenses. 14,740 For equipment. 7,000 Total cash disbursements. 75,790 Expected cash balance (overdraft). (1,690) Financing: Borrowings (at beginning)..... 7,000 Repayments (at end). Interest (at 12% per year). Total financing 7,000 Cash balance, ending....... 5,310 5. Prepare an income statement for the quarter ended December 31. (Use the functional format in preparing your income statement, as shown in the text.) 6. Prepare a balance sheet as of December 31. 243,000 $ 40,800 $ ANSWER SHEET NAME Pocketchange Company Income Statement For the quarter ended December 31, 2021 Sales........ Beginning inventory. Purchases........ Goods available.. Ending inventory... Cost of goods sold Gross profit...... Operating expenses: Salaries...... Rent.... Depreciation..... Other expenses.. Net operating income.... Less: Interest expenses. Net income.... Pocketchange Company Balance Sheet December 31, 2021 Assets Cash (Part 4) Accounts receivable Inventory (Part 2) Total current assets Fixed assets - net of accumulated depreciation Total assets................. Liabilities and Equity Accounts payable Notes payable Interest payable Total liabilites Stockholders' equity: Capital stock Retained earnings Total liabilities and equity...... $ 150,000