Baird Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

Problem 14-23 Part 1

Required

October sales are estimated to be $300,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.

The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.

The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next months cost of goods sold. However, ending inventory of December is expected to be $12,100. Assume that all purchases are made on account. Prepare an inventory purchases budget.

The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases.

Budgeted selling and administrative expenses per month follow:

Salary expense (fixed)	$	18,100
Sales commissions		4	% of Sales
Supplies expense		2	% of Sales
Utilities (fixed)	$	1,500
Depreciation on store fixtures (fixed)*	$	4,100
Rent (fixed)	$	4,900
Miscellaneous (fixed)	$	1,300

*The capital expenditures budget indicates that Baird will spend $119,400 on October 1 for store fixtures, which are expected to have a $21,000 salvage value and a two-year (24-month) useful life.

Use this information to prepare a selling and administrative expenses budget.

Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.

Baird borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $13,000 cash cushion. Prepare a cash budget.

Prepare a pro forma income statement for the quarter. (all answers below are already correct for income statement)

Prepare a pro forma balance sheet at the end of the quarter. (blank boxes or not attempted need answers)

Prepare a pro forma statement of cash flows for the quarter. (blank boxes or not attempted need answers)

Required H

Required I

Required J

Prepare a pro forma income statement for the quarter.

BAIRD COMPANY(
Pro Forma Income Statement
For the Quarter Ended December 31, 2019
Sales revenueselected answer correct	$1,092,000selected answer correct
Cost of goods soldselected answer correct	764,400selected answer correct
Gross marginselected answer correct	327,600
Selling and administrative expensesselected answer correct	(155,220)selected answer correct
Operating incomeselected answer correct	172,380
Interest expenseselected answer correct	9,816selected answer correct
Net incomeselected answer correct	$162,564

Prepare a pro forma balance sheet at the end of the quarter. (Amounts to be deducted should be indicated by a minus sign.)

BAIRD COMPANY
Pro Forma Balance Sheet
December 31, 2019
Assets
Accounts receivableselected answer correct	not attempted	$259,200selected answer correct
Inventoryselected answer correct	not attempted	12,100selected answer correct
Cashselected answer correct	not attempted	not attempted
Store fixturesselected answer correct	$119,400selected answer correct
Less: Accumulated depreciationselected answer correct	(12,300)selected answer correct
not attempted		107,100
Total assets		$378,400
Liabilities
Accounts payableselected answer correct	not attempted	not attempted
Sales commissions payableselected answer correct	not attempted	not attempted
Utilities payableselected answer correct	not attempted	1,500selected answer correct
Line of credit liabilityselected answer correct	not attempted	not attempted
not attempted	not attempted	not attempted
Equity
Retained earningsselected answer correct	not attempted	not attempted
not attempted	not attempted	not attempted
Total liabilities and equity		$1,500

Complete this question by entering your answers in the tabs below.

Required H

Required I

Required J

Prepare a pro forma statement of cash flows for the quarter. (Amounts to be deducted should be indicated by a minus sign.)

BAIRD COMPANY
Pro Forma Statement of Cash Flows
For the Quarter Ended December 31, 2019
Cash flows from operating activities
Cash receipts from customersselected answer correct	not attempted
Cash payments for inventoryselected answer correct	not attempted
Cash payments for selling and administrative expensesselected answer correct	not attempted
Cash payments for interest expenseselected answer correct	not attempted
Net cash flows from operating activities		$0
Cash flows from investing activities
Cash payment for store fixturesselected answer correct		(119,400)selected answer correct
Cash flow from financing activities
Net inflow from line of creditselected answer correct		not attempted
Net increase in cashselected answer correct		not attempted
Plus: Beginning cash balanceselected answer correct		not attempted
not attempted		$0