6-38 Comprehensive budget; fill in schedules. The following information is for Newport Stationery Store 1. Balance sheet information as of September 30,2004 : 2. Recent and anticipated sales: 3. Credit sales: Sales are 75% cash and 25% on credit. Assume that credit accounts are all collected within 30 days from sale. The accounts receivable on September 30 are the result of the credit sales iof September (25% of $40,000). 4. Gross margin averages 30% of revenues. Newport treats cash discounts on purchases in the incont statement as "other income." 5. Operating costs: Salaries and wages average 15% of monthly revenues; rent, 5%; other operating costs, excluding depreciation, 4 percent. Assume that these costs are disbursed each month. Depreciation is \$1,000 per month. 6. Purchases: Newport keeps a minimum inventory of $30,000. The policy is to purchase each month adf tional inventory in the amount necessary to provide for the following month's sales. Terms al purchases are 2/10,n/30. (Payments on purchases are to be made in 30 days; a 2% discount is available if the payment is made within 10 days after purchase.) Assume that payments are made in the month of purchase and that all discounts are taken. 7. Light fixtures: In October, $600 is spent for light fixtures, and in November, $400 is to be expended for this purpose. These amounts are to be capitalized. Assume that a minimum cash balance of $8,000 must be maintained. Assume also that all borrowing is effective at the beginning of the month and all repayments are made at the end of the month of repayment. Loans are repaid when sufficient cash is available. Interest is paid only at the time of repaying principal. The interest rate is 18% per year. Management does not want to borrow any more cash than is necessary and wants to repay as soon as cash is available. On the basis of the preceding facts: 1. Complete Schedule A. Schedule A Budgeted Mionthly Cash Receipts 2. Complete Schedule B. Note that purchases are 70% of next month's sales. Schedule B Budgeted Monthly Cash Disbursements for Purchases 3. Complete Schedule C. Schedule C Budgeted Monthly Cash Disbursements for Operating Costs 4. Complete Schedule D. Schedule D Budgeted Total Monthlv Cash Disbursements 5. Complete Schedule E. Schedule E Badgeted Cash Receipts and Disbursements 6. Complete Schedule F (assume that borrowings must be made in multiples of $1,000 ). Schedule F Financing Required 7. What do you think is the most logical type of loan needed by Newport? Explain your reasoning. 8. Prepare a budgeted income statement for the fourth quarter and a budgeted balance sheet as of December 31. Ignore income taxes. 9. Some simplifications have been included in this problem. What complicating factors might arise in a typical business situation? 6-38 Comprehensive budget; fill in schedules. The following information is for Newport Stationery Store 1. Balance sheet information as of September 30,2004 : 2. Recent and anticipated sales: 3. Credit sales: Sales are 75% cash and 25% on credit. Assume that credit accounts are all collected within 30 days from sale. The accounts receivable on September 30 are the result of the credit sales iof September (25% of $40,000). 4. Gross margin averages 30% of revenues. Newport treats cash discounts on purchases in the incont statement as "other income." 5. Operating costs: Salaries and wages average 15% of monthly revenues; rent, 5%; other operating costs, excluding depreciation, 4 percent. Assume that these costs are disbursed each month. Depreciation is \$1,000 per month. 6. Purchases: Newport keeps a minimum inventory of $30,000. The policy is to purchase each month adf tional inventory in the amount necessary to provide for the following month's sales. Terms al purchases are 2/10,n/30. (Payments on purchases are to be made in 30 days; a 2% discount is available if the payment is made within 10 days after purchase.) Assume that payments are made in the month of purchase and that all discounts are taken. 7. Light fixtures: In October, $600 is spent for light fixtures, and in November, $400 is to be expended for this purpose. These amounts are to be capitalized. Assume that a minimum cash balance of $8,000 must be maintained. Assume also that all borrowing is effective at the beginning of the month and all repayments are made at the end of the month of repayment. Loans are repaid when sufficient cash is available. Interest is paid only at the time of repaying principal. The interest rate is 18% per year. Management does not want to borrow any more cash than is necessary and wants to repay as soon as cash is available. On the basis of the preceding facts: 1. Complete Schedule A. Schedule A Budgeted Mionthly Cash Receipts 2. Complete Schedule B. Note that purchases are 70% of next month's sales. Schedule B Budgeted Monthly Cash Disbursements for Purchases 3. Complete Schedule C. Schedule C Budgeted Monthly Cash Disbursements for Operating Costs 4. Complete Schedule D. Schedule D Budgeted Total Monthlv Cash Disbursements 5. Complete Schedule E. Schedule E Badgeted Cash Receipts and Disbursements 6. Complete Schedule F (assume that borrowings must be made in multiples of $1,000 ). Schedule F Financing Required 7. What do you think is the most logical type of loan needed by Newport? Explain your reasoning. 8. Prepare a budgeted income statement for the fourth quarter and a budgeted balance sheet as of December 31. Ignore income taxes. 9. Some simplifications have been included in this problem. What complicating factors might arise in a typical business situation