HERON INC. BUDGET PROJECT

Requirements-

1. Sales Forecast and Budget
2. Cash Receipts budget
3. Purchase budget
4. Cash Purchases Disbursements budget
5. Operating Expense budget
6. Summary Cash budget
7. Budgeted Income Statement
8. Budgeted Balance Sheet

Details-

Heron, Inc. is a company that re-sells one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Heron, so Heron has no manufacturing-related costs. As of November 2020, each lawn chair costs Heron $4.50 per unit. Henron sells each chair for $10 per unit.The estimated sales (in units) are as follows:

Nov 20	11,250
Dec 20	11,500
Jan 21	9,000
Feb 21	11,400
Mar 21	12,200
Apr 21	15,600
May 21	18,200
June 21	21,542
July 21	18,500*

*You can type in this amount (instead of a cell reference) if you use this amount for a formula

1. The company plans to raise the sales price to $11.25 per unit beginning May 1, 2021. The sales forecast (i.e., estimated sales in units) takes this price increase into account.
2. Twenty-two percent of any months sales are for cash, and the remaining 78% are on credit. Thirty percent of the credit sales are collected in the month of sale, 56% are collected in the following month, and 9% are collected in the second month after the sale. The remaining receivables are deemed uncollectible. Bad debts are written off in the month the debt is deemed uncollectible (e.g. if the sale is made in January and is not collected by the end of March, it is written off in March.) No accrual for estimated bad debts is made in the month of sale.
3. The firms policy regarding inventory is to stock (i.e. have in ending inventory) 38% of the forecasted demand in units (i.e., estimated sales) for the next month. Heron uses the first-in, first-out (FIFO) method in accounting for inventories.
4. Forty-five percent of the inventory purchases are paid for in the month of purchase and the remaining 55% are paid in the following month (i.e. all of the previous months Accounts Payable are paid off by the end of any month.)
5. Per a prior contract, a cash payment of $50,000 for equipment previously purchased in 2020 is due in January. Another payment of $25,000 is due in February. Depreciation on the equipment previously purchased is included in the overhead cost detailed in item 9 below. Also, dividends of $14,000 are to be paid in March.
6. Monthly operating expenses consist of the following (if these are cash expenses, they are paid when incurred):

Salaries and Wages	$3,500
Sales Commissions	6% of sales revenue
Rent	$7,500
Other Variable Cash Expenses	4% of sales revenue
Supplies Expense: See note	$1,500
Other: See note	$51,000

Note: Other general and administrative overhead is expected to be $51,000 per month. Of this amount, $24,000 represents depreciation and the rest is other non-cash expenses. The company maintains on hand one months worth of supplies.

7. The company must maintain a minimum cash balance of $15,000. Borrowing can make up shortfalls. For simplicity, assume that the bank will only lend (and accept repayments) in $1,000 increments. Ignore interest on the loan in your calculations, but minimize the amount borrowed and pay off any loans as soon as possible.
8. The cash balance at the beginning of January is $15,000. There will be no notes payable as of this date.
9. See below the other Balance Sheet accounts with their expected balances as of December 31, 2020:
   • Supplies $1,500
   • Property, Plant and Equipment $1,050,000
   • Accumulated Depreciation $526,475
   • Common Stock $200,000
   • Retained Earnings $330,779

*Please answer this question similar to the following excel format*

*All cells colored yellow must be calculated using a excel formulas

Heron, Inc. Sales Budget For the 6 mos ending June 21 JAN-JUN 6 mos total Nov 20 Dec 20 Jan 21 Feb 21 Mar 21 Apr 21 May 21 June 21 Budgeted unit sales Selling price per unit Total Sales Cash Sales % Credit Sales % Cash Sales Credit Sales Total Sales Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections Uncollectible Heron, Inc. Cash Collections For the 6 mos ending June 21 Jan 21 Feb 21 Mar 21 Apr 21 May 21 June 21 6 mos total Current month cash Sales Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections Total cash collections Bad Debt Expense Desired ending inventory % Heron, Inc. Purchase Budget For the 6 mos ending June 21 JAN-JUN 6 mos total Nov 20 Dec '20 Jan 21 Feb 21 Mar 21 Apr 21 May 21 June 21 Budged unit sales Add desired ending inventory Total needs Less Beginning Inventory Required Purchases Cost per unit Purchases % Paid in Month of Purchase % Paid in Month after Purchase Heron, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June 21 Jan 21 Feb 21 Mar 21 Apr 21 May 21 June 21 6 mos total Cash purchases 1 month prior A/P Collections Cash disbursements for merchandise purch. Fixed Operating expenses Salaries and Wages Rent Supplies Expense Other - Overhead Other - Depreciation Variable Operating Expenses: Sales Commissions, % of Revenue Other Variable Cash Expenses, % of Revenue Heron, Inc. Operating Expense Budget For the 6 mos ending June 21 Jan 21 Feb 21 Mar 21 Apr 21 May 21 June 21 6 mos total Salaries and Wages Sales Commissions Rent Other Variable Cash Expenses Supplies Expense Other - Overhead Other - Depreciation Bad Debt Expense Total operating expenses Depreciation and noncash items Expense Cash disbursements for operating expenses Bad Debt Equipment payment - January Equipment payment - February Dividends - March Minimum Monthly Cash Budget Heron, Inc. Cash Budget For the 6 mos ending June 21 Jan 21 Feb 21 Mar 21 Apr 21 May 21 June 21 6 mos total Cash balance, beginning Add collections from customers Total cash available Less disbursements: Cash disbursements for merchandise purch. Cash disbursements for operating expenses Equipment purchases Dividends Total cash disbursements Cash subtotal before financing Financing Borrowing-note Repayments-note (show as negative) Total financing Cash balance, ending Heron, Inc. Budgeted Income Statement For the 6 mos ending June '21 Jan 21 Feb 21 Mar 21 Apr 21 May 21 June '21 Total Sales, net COGS Gross margin Total operating expenses Net Income Supplies @ 12/31 Property, Plant & Equip @ 12/31 Accumulated Depreciation @ 12/31 Common Stock @ 1231 Retained Earnings @ 1231 Heron, Inc. Budgeted Balance Sheet 6/30/2021 Assets Current Assets: Cash Accounts receivable (Formula not graded) Supplies Merchandise Inventory Plant and Equipment: Buildings and Equipment Accumulated Depreciation Total assets Liabilities and Equity Accounts payable Capital stock Retained earnings Total liabilities and equity