Fanning Company is a retail company that specializes in selling outdoor camping equipment The company is considering opening a new store on October 1, year 1 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 Required October sales are estimated to be $230,000, of which 45 percent will be cash and 55 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 60 percent of sales The company desires to maintain a minimum ending inventory equal to 10 percent of the next months cost of goods sold However, ending inventory of December is expected to be $12,400 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) $ 18,400 Sales commissions 5 of Sales Supplies expense 2 of Sales Utilities (fixed) $ 1,800 Depreciation on store fixtures (fixed) $ 4,400 Rent (fixed) $ 5,200 Miscellaneous (fixed) $ 1,600 The capital expenditures budget indicates that Fanning will spend $182,400 on October 1 for store fixtures, which are expected to have a $24,000 salvage value and a three year (36 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 Fanning 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 1 percent per month in cash on the last day of the month To be prudent, the company desires to maintain a $16,000 cash cushion Prepare a cash budget Prepare a pro forma income statement for the quarter Prepare a pro forma balance sheet at the end of the quarter Prepare a pro forma statement of cash flows for the quarter Fanning 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 1 percent per month in cash on the last day of the month To be prudent, the company desires to maintain a $16,000 cash cushion Prepare Show more Cash Budget October November December $ 0 $ 103,500 103,500 16,652 250,700 267,352 300,840 300,840 Section 1 Cash Receipts Beginning cash balance Add Cash receipts Total cash available Section 2 Cash Payments For inventory purchases For selling and administrative expenses Purchase of store fixtures Interest expense 123,648 29,800 182,400 166,042 44,020 47,424 0 335,848 210,062 47,424 Total budgeted disbursements Section 3 Financing Activities Surplus (shortage) Borrowing (repayment) Ending cash balance 57,290 253,416 (232,348) 249,000 16,652 $ $ 57,290 $ 253,416 Prepare a pro forma income statement for the quarter FANNING COMPANY Pro Forma Income Statement For the Quarter Ended December 31, Year 1 Sales revenue Cost of goods sold 502,320 Gross margin (502,320) Selling and administrative expenses Operating income (502,320) Interest expense Net income $ (502,320) Prepare a pro forma balance sheet at the end of the quarter (Amount FANNING COMPANY Pro Forma Balance Sheet December 31, Year 1 Assets Cash Inventory Accounts receivable Store fixtures Accumulated depreciation Book value of fixtures Total assets Liabilities Accounts payable Line of credit liability Sales commissions payable Utilities payable 0 $ GA 0 Equity Retained earnings Total liabilities and equity Prepare a pro forma statement of cash flows for the quarter (Cash outflows should be indicate FANNING COMPANY Pro Forma Statement of Cash Flows For the Quarter Ended December 31, Year 1 Cash flows from operating activities Cash receipts from customers Cash payments for selling and administrative expenses Cash payments for inventory Cash payments for interest expense Net cash flows from operating activities Cash flows from investing activities Cash payment for store fixtures Cash flow from financing activities Net inflow from line of credit Net increase in cash Plus Beginning cash balance Ending cash balance 0 0

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Fanning Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, year

Fanning Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, year 1. 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.

Required

October sales are estimated to be $230,000, of which 45 percent will be cash and 55 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 60 percent of sales. The company desires to maintain a minimum ending inventory equal to 10 percent of the next months cost of goods sold. However, ending inventory of December is expected to be $12,400. 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)	$	18,400
Sales commissions		5	% of Sales
Supplies expense		2	% of Sales
Utilities (fixed)	$	1,800
Depreciation on store fixtures (fixed)*	$	4,400
Rent (fixed)	$	5,200
Miscellaneous (fixed)	$	1,600

*The capital expenditures budget indicates that Fanning will spend $182,400 on October 1 for store fixtures, which are expected to have a $24,000 salvage value and a three-year (36-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.
Fanning 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 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $16,000 cash cushion. Prepare a cash budget.
Prepare a pro forma income statement for the quarter.
Prepare a pro forma balance sheet at the end of the quarter.
Prepare a pro forma statement of cash flows for the quarter.

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Fanning 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 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $16,000 cash cushion. Prepare Show more Cash Budget October November December $ 0 $ 103,500 103,500 16,652 250,700 267,352 300,840 300,840 Section 1: Cash Receipts Beginning cash balance Add: Cash receipts Total cash available Section 2: Cash Payments For inventory purchases For selling and administrative expenses Purchase of store fixtures Interest expense 123,648 29,800 182,400 166,042 44,020 47,424 0 335,848 210,062 47,424 Total budgeted disbursements Section 3: Financing Activities Surplus (shortage) Borrowing (repayment) Ending cash balance 57,290 253,416 (232,348) 249,000 16,652 $ $ 57,290 $ 253,416 Prepare a pro forma income statement for the quarter. FANNING COMPANY Pro Forma Income Statement For the Quarter Ended December 31, Year 1 Sales revenue Cost of goods sold 502,320 Gross margin (502,320) Selling and administrative expenses Operating income (502,320) Interest expense Net income $ (502,320) Prepare a pro forma balance sheet at the end of the quarter. (Amount FANNING COMPANY Pro Forma Balance Sheet December 31, Year 1 Assets Cash Inventory Accounts receivable Store fixtures Accumulated depreciation Book value of fixtures Total assets Liabilities Accounts payable Line of credit liability Sales commissions payable Utilities payable 0 $ GA 0 Equity Retained earnings Total liabilities and equity Prepare a pro forma statement of cash flows for the quarter. (Cash outflows should be indicate FANNING COMPANY Pro Forma Statement of Cash Flows For the Quarter Ended December 31, Year 1 Cash flows from operating activities Cash receipts from customers Cash payments for selling and administrative expenses Cash payments for inventory Cash payments for interest expense Net cash flows from operating activities Cash flows from investing activities Cash payment for store fixtures Cash flow from financing activities Net inflow from line of credit Net increase in cash Plus: Beginning cash balance Ending cash balance 0 0