Fraser Corp. is a traditional retailer that recently also started an Internet-based subsidiary that sells its product online. Its sales in June 2018 were $710,000. Fraser, the company president, is preparing for a meeting with Tom Scott, a loan officer with Anchor Bank, to review quarter end financing requirements. After discussions with the companys marketing and finance managers, sales over the next three months were forecasted as follows. Sales in July 2018: $1,250,000, sales in August 2018: $2,250,000 and sales in September 2018: $2,500,000.

Frasers balance sheet as of the end of June, 2018 was as follows.

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Fraser Corporation

Balance Sheet as of June 30, 2018 (in $ Thousands)

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Cash $ 50 Accounts payable $ 10

Accounts receivable 710 Notes payable 800

Inventories 600 Long-term debt 400

Net fixed assets 750 Total liabilities 1,210

Equity 900

Total assets $2,110 Total $2,110

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All sales are made on credit terms of net 30 days and are collected the following month and no bad debts are anticipated. The accounts receivable on the balance sheet at the end of June thus will be collected in July. The July sales will be collected in August, and so on The amount of Inventory on hand represents the operating level which the company intends to maintain (i.e., not percentage of sales). Cost of goods sold average 70 percent of sales. Inventory is purchased in the month of sale and paid for in cash. Other cash expenses average 7 percent of sales. Assume taxes are paid monthly and the effective income tax rate is 40 percent for planning purposes. Fraser is planning to purchase a small warehouse in September 2018 for $100,000. Depreciation is $10,000 per month including depreciation expenses for the warehouse.

The annual interest rate on outstanding long term debt and notes payable is 12% per annum. There are no capital expenditures planned during the period, and no dividends will be paid. The companys desired end-of-month cash balance is $90,000. The president hopes to meet any cash shortages during the period by borrowing (short term) from the bank at the end of the month. The interest rate on the new bank loans will be 12% per annum. All interest expenses are based on previous months debt.

Prepare monthly pro forma balance sheets at the end of July, August, and September 2018.

(2 marks).