Chris P. Bacon is the owner and operator of a delicatessen.Until recently, he managed the business primarily on his own however, in 2019 he began to sell organic flash frozen meats that can be shipped overnight via FedEx and his sales have grown quickly.He has had to hire several additional staff members and is considering borrowing from the bank to help him manage the company's cash flow needs.The manager of his local bank branch has requested a projected cash budget and pro forma income statement for the six months period from July - Dec 30, 2020.Chris hired you several months ago to assist him with the record keeping in the business as he has been falling further and further behind with the paperwork.As you are a Financial Services graduate from Humber College, Chris knows that you have the skills he is missing in this area.

Sales for May and June 2020 were $46,700 and $65,890 respectively and are expected to continue to grow monthly at a rate of 12% per month based on June for the foreseeable future. Cash sales each month average 15%.Of the remaining sales, half is collected in 30 days and the other half is collected in 60 days.

Purchases each month total 65% of the sales and are paid in full 30 days after the purchase is made.

Other monthly expenses are as follows:salaries $12,000, rent $2,200, shipping and delivery fees 5% of sales, advertising $2,300.

Chris is investing in a new computer system in August 2020 and he is expecting to pay $13,800 including installation.He is also expecting to attend a virtual organic foods conference November.This will cost approximately $8,000.

The company's income taxes of 24% of operating income must be paid December 31, 2020.(HINT:COMPLETE THE CASH BUDGET AS FAR AS POSSIBLE WITHOUT THE INCOME TAX FIGURE, COMPLETE THE PRO FORMA INCOME STATEMENT TO OPERATING INCOME, AND THEN CALCULATE THE TAX)

The computer system will be depreciated at a rate of 3% per month.

The beginning bank balance in July 2020 is expected to be $12,000.

Required:

1.Prepare a cash budget for the 6 months from July 01 - December 31, 2020.

2.Prepare a pro forma income statement for July 01 - December 31, 2020