Gibson Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation.

Given:

October sales are estimated to be $320,000, 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 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next months cost of goods sold. However, ending inventory of December is expected to be $12,700. 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)	$	18,700
Sales commissions		4	% of Sales
Supplies expense		2	% of Sales
Utilities (fixed)	$	2,100
Depreciation on store fixtures (fixed)*	$	4,700
Rent (fixed)	$	5,500
Miscellaneous (fixed)	$	1,900

*The capital expenditures budget indicates that Gibson will spend $139,800 on October 1 for store fixtures, which are expected to have a $27,000 salvage value and a two-year (24-month) useful life.

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.

Gibson 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 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $19,000 cash cushion. Prepare a cash budget.

As budget coordinator, you have been assigned the following tasks:

Prepare a pro forma income statement for the quarter.

GIBSON COMPANY
Pro Forma Income Statement
For the Quarter Ended December 31, 2019
Sales revenue
Cost of goods sold
Gross margin
Selling and administrative expenses
Operating income
Interest expense
Net income

Prepare a pro forma balance sheet at the end of the quarter. (Amounts to be deducted should be indicated by a minus sign.)

GIBSON COMPANY
Pro Forma Balance Sheet
December 31, 2019
Assets
Accounts receivable	XXXX
Cash	XXXX
Inventory	XXXX
Store fixtures		XXXX
Less: Accumulated depreciation		XXXX
Book value of fixtures
Total assets	XXX
Liabilities
Accounts payable	XXX
Line of credit liability	XXX
Sales commissions payable	XXx
Utilities payable	XxX
Equity
Retained earnings	XXXX
Total liabilities and equity	XXXX

Prepare a pro forma statement of cash flows for the quarter. (Amounts to be deducted should be indicated by a minus sign.)

GIBSON COMPANY
Pro Forma Statement of Cash Flows
For the Quarter Ended December 31, 2019
Cash flows from operating activities
Cash receipts from customers		Xxxx
Cash payments for selling and administrative expenses		Xxxx
Cash payments for inventory		Xxxx
Cash payments for interest expense		Xxxx
Net cash flows from operating activities	Xxxx	$
Cash flows from investing activities	Xxxx
Cash payment for store fixtures	Xxxx
Cash flow from financing activities	Xxxxx
Net inflow from line of credit	Xxxx
Net increase in cash	Xxxxx
Plus: Beginning cash balance	Xxxxx
Ending cash balance	Xxxxx

Answers are only needed in the blank boxes - the XXXXs indicate a blank space.