Case 10-59

Sports Fanatic Company is a retail sporting goods store that uses accrual accounting for its records. Information on Sports Fanatics operations are as follows:

1.	The store has budgeted sales at $220,000 for January and $200,000 for February.
2.	It expects collections to be 60% in the month of sale and 38% in the month following the sale. It expects 2% of sales to be uncollectible.
3.	Gross margin is 25% of sales.
4.	It purchases a total of 80% of the merchandise for resale in the month before the month of sale and 20% in the month of sale. It makes payments for merchandise in the month after it purchases it.
5.	Other expected monthly expenses to be paid in cash amount to $22,600.
6.	Annual depreciation is $216,000.
7.	Sports Fanatics balance sheet at the close of business on December 31 follows.

SPORTS FANATIC COMPANY Balance Sheet December 31
Assets
Cash	$22,000
Accounts receivable (net of $4,000 allowance for uncollectible accounts)	76,000
Inventory	132,000
Property, plant, and equipment (net of $680,000 of accumulated depreciation)	870,000
Total assets	$1,100,000
Liabilities and Shareholders Equity
Accounts payable	$162,000
Common shares	800,000
Retained earnings	138,000
Total liabilities and shareholders equity	$1,100,000

Prepare the income statement for January. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

SPORTS FANATIC COMPANY Pro Forma Income Statement For the Month of January
Bad Debt ExpenseTotal Operating ExpensesCost of Goods SoldDepreciationOther ExpensesOperating ExpensesNet Income / (Loss) Before Income TaxesDelivery ExpenseSelling and Administrative ExpensesRent ExpenseSalesGross ProfitEAT_1425385511365_1_2282439988024074	$ 220,000
AddLessEAT_1425385593511_1_2482468729158254: Total Operating ExpensesNet Income / (Loss) Before Income TaxesDelivery ExpenseSelling and Administrative ExpensesRent ExpenseDepreciationGross ProfitSalesCost of Goods SoldOperating ExpensesOther ExpensesBad Debt ExpenseEAT_1425385511365_1_9803083544185247	165,000
Gross ProfitTotal Operating ExpensesNet Income / (Loss) Before Income TaxesSelling and Administrative ExpensesRent ExpenseDepreciationOther ExpensesSalesOperating ExpensesBad Debt ExpenseDelivery ExpenseCost of Goods SoldEAT_1425385511365_1_3998004633713914	55,000
AddLessEAT_1425385593511_1_2482468729158254: Other ExpensesTotal Operating ExpensesCost of Goods SoldSalesRent ExpenseNet Income / (Loss) Before Income TaxesBad Debt ExpenseGross ProfitSelling and Administrative ExpensesDelivery ExpenseOperating ExpensesDepreciationEAT_1425385511365_1_053671971906068
Operating ExpensesNet Income / (Loss) Before Income TaxesTotal Operating ExpensesOther ExpensesDepreciationRent ExpenseDelivery ExpenseBad Debt ExpenseSalesSelling and Administrative ExpensesCost of Goods SoldGross ProfitEAT_1425385511365_1_9007008153697054	$ 4,400
Net Income / (Loss) Before Income TaxesSalesGross ProfitOperating ExpensesDelivery ExpenseTotal Operating ExpensesDepreciationCost of Goods SoldBad Debt ExpenseRent ExpenseOther ExpensesSelling and Administrative ExpensesEAT_1425385511365_1_6674899411041548	18,000
Cost of Goods SoldDelivery ExpenseOperating ExpensesSalesDepreciationGross ProfitTotal Operating ExpensesBad Debt ExpenseNet Income / (Loss) Before Income TaxesOther ExpensesSelling and Administrative ExpensesRent ExpenseEAT_1425385511365_1_7389076406215813	22,600
Bad Debt ExpenseOther ExpensesDelivery ExpenseDepreciationCost of Goods SoldNet Income / (Loss) Before Income TaxesSelling and Administrative ExpensesRent ExpenseSalesGross ProfitOperating ExpensesTotal Operating ExpensesEAT_1425385511365_1_4342562790894624	45,000
Total Operating ExpensesNet Income / (Loss) Before Income TaxesDepreciationSalesCost of Goods SoldOther ExpensesBad Debt ExpenseOperating ExpensesRent ExpenseDelivery ExpenseSelling and Administrative ExpensesGross ProfitEAT_1425385511365_1_845475033881652	$ 10,000

Prepare the cash budget for January. (Do not leave any answer field blank. Enter 0 for amounts.

SPORTS FANATIC COMPANY Cash Budget For the Month of January
Excess (Deficiency) of Cash Available Over Cash DisbursementsTotal Available CashEnding Cash BalanceTotal FinancingBeginning Cash BalanceExcess (Deficiency) of Cash Receipts Over Cash DisbursementsCash ReceiptsDisbursementsTotal DisbursementsTotal Cash ReceiptsFinancingEAT_1332924875003_0_25778105254004857_002	$ 22,000
AddLessEAT_1425380573576_1_584537496849135: Cash ReceiptsEnding Cash BalanceFinancingTotal FinancingExcess (Deficiency) of Cash Receipts Over Cash DisbursementsTotal Cash ReceiptsTotal Available CashExcess (Deficiency) of Cash Available Over Cash DisbursementsBeginning Cash BalanceEAT_1332924875003_0_25778105254004857_004
Accounts Payablefrom DecemberRepaymentBorrowingAccounts Receivablefrom DecemberMerchandise PurchasesCollections from JanuaryOther CostsPurchase of EquipmentPurchase of LandEAT_1425386143959_1_1520941122923016	76,000
BorrowingAccounts Receivablefrom DecemberCollections from JanuaryAccounts Payablefrom DecemberMerchandise PurchasesRepaymentPurchase of EquipmentOther CostsPurchase of LandEAT_1332924875003_0_25778105254004857_032	132,000
Beginning Cash BalanceEnding Cash BalanceCash ReceiptsExcess (Deficiency) of Cash Available Over Cash DisbursementsTotal Cash ReceiptsTotal Available CashExcess (Deficiency) of Cash Receipts Over Cash DisbursementsFinancingTotal FinancingEAT_1332924875003_0_25778105254004857_005	208,000
Beginning Cash BalanceExcess (Deficiency) of Cash Receipts Over Cash DisbursementsTotal Available CashTotal FinancingTotal DisbursementsExcess (Deficiency) of Cash Available Over Cash DisbursementsEnding Cash BalanceDisbursementsCash ReceiptsTotal Cash ReceiptsFinancingEAT_1332924875003_0_25778105254004857_006	230,000
AddLessEAT_1425380573576_1_0431828598420982: Excess (Deficiency) of Cash Available Over Cash DisbursementsExcess (Deficiency) of Cash Receipts Over Cash DisbursementsDisbursementsFinancingTotal DisbursementsTotal Available CashTotal FinancingEnding Cash BalanceBeginning Cash BalanceEAT_1332924875003_0_25778105254004857_007
Collections from JanuaryAccounts Payablefrom DecemberAccounts Receivablefrom DecemberRepaymentPurchase of LandMerchandise PurchasesBorrowingOther CostsPurchase of EquipmentEAT_1332924875003_0_25778105254004857_033	162,000
Other CostsPurchase of LandRepaymentMerchandise PurchasesBorrowingAccounts Receivablefrom DecemberPurchase of EquipmentAccounts Payablefrom DecemberCollections from JanuaryEAT_1332924875003_0_25778105254004857_034
Excess (Deficiency) of Cash Available Over Cash DisbursementsBeginning Cash BalanceDisbursementsFinancingTotal FinancingTotal Available CashExcess (Deficiency) of Cash Receipts Over Cash DisbursementsEnding Cash BalanceTotal DisbursementsEAT_1332924875003_0_25778105254004857_008
DisbursementsBeginning Cash BalanceEnding Cash BalanceExcess (Deficiency) of Cash Available Over Cash DisbursementsFinancingExcess (Deficiency) of Cash Receipts Over Cash DisbursementsTotal FinancingCash ReceiptsTotal Cash ReceiptsTotal Available CashTotal DisbursementsEAT_1425380017892_1_1428966941014345
Cash ReceiptsBeginning Cash BalanceDisbursementsTotal DisbursementsTotal Available CashFinancingTotal Cash ReceiptsTotal FinancingExcess (Deficiency) of Cash Receipts Over Cash DisbursementsExcess (Deficiency) of Cash Available Over Cash DisbursementsEnding Cash BalanceEAT_1332924875003_0_25778105254004857_009:
Purchase of EquipmentRepaymentOperating CostsBorrowingMerchandise PurchasesCollections from DecemberPurchase of LandCollections from NovemberAccounts Payablefrom DecemberEAT_1332924875003_0_25778105254004857_042
AddLessEAT_1425380994405_1_7343620201881798: Operating CostsPurchase of EquipmentCollections from DecemberCollections from NovemberPurchase of LandAccounts Payablefrom DecemberMerchandise PurchasesRepaymentBorrowingEAT_1332924875003_0_25778105254004857_041
Total Cash ReceiptsTotal Available CashBeginning Cash BalanceTotal DisbursementsDisbursementsEnding Cash BalanceExcess (Deficiency) of Cash Receipts Over Cash DisbursementsFinancingExcess (Deficiency) of Cash Available Over Cash DisbursementsTotal FinancingCash ReceiptsEAT_1332924875003_0_25778105254004857_010
FinancingCash ReceiptsTotal Cash ReceiptsTotal FinancingEnding Cash BalanceTotal DisbursementsTotal Available CashDisbursementsExcess (Deficiency) of Cash Receipts Over Cash DisbursementsBeginning Cash BalanceExcess (Deficiency) of Cash Available Over Cash DisbursementsEAT_1332924875003_0_25778105254004857_003	$

Prepare the budgeted balance sheet for January. (List Current Assets in order of liquidity.)

SPORTS FANATIC COMPANY Pro Forma Balance Sheet As at January 31
Assets
Income Taxes PayableFinished Goods InventoryCashAccounts PayableCommon SharesNotes PayableAccounts ReceivableProperty, Plant and EquipmentRetained EarningsTotal AssetsInventoryTotal Liabilities and Shareholders' EquityAccumulated Depreciationres_EAT_1315545515287_0_4841113548767988_245_resp_4	$
Income Taxes PayableCashNotes PayableTotal AssetsAccounts PayableRetained EarningsInventoryTotal Liabilities and Shareholders' EquityAccounts ReceivableAccumulated DepreciationCommon SharesProperty, Plant and EquipmentFinished Goods Inventoryres_EAT_1315545515287_0_4841113548767988_245_resp_2
Accounts ReceivableAccumulated DepreciationCashCommon SharesInventoryProperty, Plant and EquipmentFinished Goods InventoryIncome Taxes PayableTotal AssetsAccounts PayableNotes PayableRetained EarningsTotal Liabilities and Shareholders' Equityres_EAT_1315545515287_0_4841113548767988_245_resp_7
Property, Plant and EquipmentRetained EarningsFinished Goods InventoryAccumulated DepreciationCashIncome Taxes PayableTotal AssetsNotes PayableInventoryCommon SharesAccounts PayableTotal Liabilities and Shareholders' EquityAccounts Receivableres_EAT_1315545515287_0_4841113548767988_245_resp_6
Retained EarningsFinished Goods InventoryNotes PayableProperty, Plant and EquipmentCommon SharesIncome Taxes PayableAccounts PayableInventoryTotal AssetsTotal Liabilities and Shareholders' EquityAccounts ReceivableAccumulated DepreciationCashEAT_1425386817875_1_4638159214952755	$
Liabilities and Shareholders Equity
Retained EarningsFinished Goods InventoryAccounts PayableInventoryAccounts ReceivableIncome Taxes PayableTotal AssetsAccumulated DepreciationCashCommon SharesTotal Liabilities and Shareholders' EquityNotes PayableProperty, Plant and Equipmentres_EAT_1315545515287_0_4841113548767988_245_resp_1	$ 153,000
Total Liabilities and Shareholders' EquityCommon SharesAccounts ReceivableCashProperty, Plant and EquipmentAccounts PayableAccumulated DepreciationIncome Taxes PayableFinished Goods InventoryInventoryNotes PayableRetained EarningsTotal Assetsres_EAT_1315545515287_0_4841113548767988_245_resp_5	800,000
Accounts PayableAccounts ReceivableIncome Taxes PayableNotes PayableRetained EarningsTotal AssetsAccumulated DepreciationCashInventoryCommon SharesTotal Liabilities and Shareholders' EquityProperty, Plant and EquipmentFinished Goods Inventoryres_EAT_1315545515287_0_4841113548767988_245_resp_10
Accumulated DepreciationTotal Liabilities and Shareholders' EquityCashAccounts PayableFinished Goods InventoryCommon SharesProperty, Plant and EquipmentAccounts ReceivableIncome Taxes PayableNotes PayableRetained EarningsInventoryTotal AssetsEAT_1425386817875_1_6463310782167278	$