Given the information that follows, prepare a cash budget for the XYZ Store for the first six months of 2016. All prices and costs remain constant. Sales are 88% for credit and 12% for cash. With respect to credit sales, 45% are collected in the month after the sale, 35% in the second month, and 20% in the third. Bad-debt losses are insignificant.

Sales, actual and estimated, are (* for actual sales):

October 2015	$275,000*	March 2016	$340,000
November 2015	350,000*	April 2016	310,000
December 2015	320,000*	May 2016	375,000
January 2016	290,000	June 2016	280,000
February 2016	300,000	July 2016	370,000

Merchandises are purchased one month before the anticipated sales at 78% (COGS). Assume all purchases arrived in the same month of ordering, and the company will pay the purchase exactly 1 month after placing the order.

Wages and salaries are:

January 2016	$40,000	April 2016	$60,000
February 2016	45,000	May 2016	55,000
March 2016	50,000	June 2016	52,000

Rent is $5,000 a month.

Interest of $7,500 is due on the last day of each calendar quarter, and no quarterly cash dividends are planned.

A tax prepayment of $50,000 for 2016 income is due in April.

A capital investment of $50,000 is planned in June, to be paid for then.

The company has a cash balance of $100,000 at December 31, 2015, which is the minimum desired level for cash. Funds can be borrowed in multiples of $10,000. (Ignore interest on such borrowings.)

part ( b)

Use the cash budget worked out in Part (a) and the following additional information to prepare a forecast income statement for the first half of 2016 for the XYZ Store. (Note that the store maintains a safety stock of inventory.) Inventory at 12/31/15 was $180,000.

Depreciation is taken on a straight-line basis on $240,000 of assets with an average remaining life of 10 years and no salvage value.

The tax rate is 35 percent.

Part (c)

Given the following information and that contained in Parts (a) and (b), construct a forecast balance sheet as of June 30, 2016, for the XYZ Store.

XYZ Store balance sheet at December 31, 2015

ASSETS LIABILITIES AND EQUITY

Cash		$100,000		Accounts payable $100,000
Accounts receivable		427,500		Bonds 500,000
Inventory		180,000		Common stock and retained earnings
Fixed assets, net		240,000		347,500
		$947,500		$947,500