Budget Planning Following is selected information relating to the operations of Pocketchange Company, a tile distributor. September 30, 2020 - Trial Balance information 3 Cash Accounts receivable.......... Inventory........... .. . . .... Plant and equipment, net of Acc. Dep. Accounts payable.............................. Capital stock..................... Retained earnings.................. 8 ,500 24.800 39,600 428,600 24,050 150,000 327,450 501.500 $ 501.500 $ a. Actual and budgeted sales data: T$ 62 000 66,000 > September (actual)...... October November............... . December..... ........ January... .............. .. 80,000 S 40 com prier month 94.000 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 1. 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) 9. Equipment costing $7.000 will be purchased for cash in the October and another $3,000 in November 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 multiples of $1,000. The annual interest rate is 12%. Interest is paid only at the time of repayment of principles; figure interest on the whole month (2/12, 3/12, and so forth). Any unpaid interest is accrued at the end of the quarter. Required: Using the data above Sales $ 2,000 NAME COOO 94000 240,00 1. Complete the following schedule Schedule of Expected Cash Collections Oct. Cash sales...... ................. Credit sales.... 24,800 Total collections.... ......... Nov Dec Quarter Nov 00000 2 Complete the following Inventory Purchases Budget Oct. Budgeted cost of goods sold. 49 600 Add: Desired ending inventory. ++ 48.000 Total needs 27.500 Less: Beginning inventory...... ....... 29 60 Required purchases.... 57 900 + Oct Sales X 75% cost ratio = $ ++ Nav Sales X 75% cost ratio X 80% = $ Nov Dec. Schedule of Expected Cash Disbursements-Purchases Oct Sept purchases.................................. 5 Oct purchases W pics 28.950 Nov purchases.......................... Dec purchases Total disbursements for purchases....... 5 3.000 Quarter 24.050 57.900 - 24,950 Dec. Quarter 3. Complete the following: Schedule of Expected Cash Disbursements Operating Expenses Oct Salanes and wages...................... ...... Rent......... 2.500 2560 Other expenses....................... 3.980 Total disbursements.......... . 14,300 7520 2500 Oct Dec 4 Complete the following cash budget Cash Budget Cash Receipts and Disbursements Nov Cash balance, beginning... $ 8.500 Add cash collections............................... 4 6 4 400 Total cash available.. .. 72 900 Less Cash disbursements................. For inventory.......... .... 53,000 For expenses........... 14,380 For equipment.... 7,000 2,arx Total cash disbursements 74390 Expected cash balance (overdraft)........... (1,490) Financing Borrowings (at beginning)........................ 7,000 Repayments (at end)............................ Interest (at 12% per year).................. Total financing 7,000 Cash balance, ending.................... 5.520 - O 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 Income Statement For the quarter ended December 31, 2020 S 240,000 39,600 Sales Beginning inventory.... Purchases.. Goods available.. Ending inventory... Cost of goods sold Gross margin..... Operating expenses: Salaries Rent... Depreciation........ Other expenses..... Net operating income........ Less: Interest expenses.... Net income.. Pocketchange Company Balance Sheet December 31, 2020 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