Ethan has made some sales forecasts for 20Y2. He expects monthly sales to start at $400,000 in January and then grow $20,000 per month during the first half of the year, as follows:

Nomad's balance sheet on December 31, 20Y1 is as follows:

Assets
Cash	$ 124,000
Accounts receivable [a]	304,000
Inventory	120,000
Prepaid insurance	36,000
PP&E, net of accumulated depreciation	796,000
Total assets	$1,380,000

Liabilities and Stockholders' Equity
Accounts payable [b]	$ 163,800
Dividends payable	50,000
Common stock	1,000,000
Retained earnings	166,200
Total liabilities & stockholders' equity	$1,380,000

Case 2. Annual Budget and Budgeted Financial Statements - Solution 3. S&A expenses budget and expected cash payments for S&A expenses, 20Y2 January February March April May June 6 months Accrual-basis S&A expenses 400,000 420,000 440,000 460,000 480,000 500,000 2.700,000 1. Sales budget and expected cash collections from inventory sales, 20Y2 Variable S&A expenses 20,000 21000 22000 23000 24000 25000 135,000 January February March April May June 6 months Fixed S&A expenses 70,000 0000 70000 70000 Accrual-basis sales revenue 70000 400,000 420000 70000 440000 20,000 160,000 180,00 00,000 , 7000,000 Total S&A expenses 90,000 91000 92000 93000 94000 95000 655,000 Cash receipts from sales: Cash payments for S&A expenses Prior month's sales 304,000 320,000 836,000 352,000 368,000 384,000 2.084.000 - Depreciation expense 10,000) -10000 -10000 Current month's sales $4,000 -10000 10000 -10000 0,000 88,000 80000 82,000 98,000 100,000 540,000 - Prepaid insurance expense "3,000) 3000 -3000 -3000 -3000 Total cash receipts -3000 384,000 404,000 424,000 444,000 464,000 18,000 484,000 2.604.000 Total cash payment 77,000 78000 79000 80000 81000 82000 477,000 2. Merchandise purchases budget and expected cash payments for inventory purchases, 20Y2 4. Cash budget, 20Y2 January February March April May June 6 months Budgeted COGS January February March 240,000 April May June 252,000 6 months 264,000 276,000 288,000 300,000 .620,000 Beginning cash balance 124,000 + Desired ending inventory 26,000 68400 144800 22820 78600 276000 1,020,000 132,000 138,000 144,000 50,000 56,000 156.000 + Cash receipts from sales 384,000 404000 424000 444000 64000 Total inventory needed 184000 $66,000 2.604,000 384,000 402,000 420,000 438,000 458,000 ,776.000 - Cash payments for: - Beginning inventory 20,000 126,000 132,000 138,000 50,000 20,000 Inventory purchases step 1 (237,600) (248600) 261600) 273800) 285800) (297600) Required inventory purchases 1605800) 246,000 258,000 270,000 282,000 294,000 308,000 1.658,000 S&A expenses step 3 77,000) (78000) (79000) 80000) 81000) B2000) 477000) Cash payments for: Capital expenditures 75,000) 0 0 75000 0 150000 Prior month's purchases 63,800 Dividends 172,200 50,000) 0 180,600 89,000 97,400 0 0 205,800 . 108,800 50000 Current month's purchases 73,800 income taxes 0 0 77.400 81,000 $4,600 0 65,000) 0 88,200 1,800 96,800 65000) 130,000) Total cash payments 237,600 249,600 261,600 273,600 Ending cash balance 285.600 58,400 144800 297,600 1,605.600 228200 17860 276000 315400 1,211,400