John Smith is the founder and owner of the Best Oxygen Corporation, which has only recently begun operations. It offers the following products: (1) home-based oxygen concentrators; (2) portable oxygen systems; and (3) oxygen concentrator components and accessories. Some of its products are equipped with patent-protected technologies owned by Best Oxygen. Smith believes that the products Best Oxygen provides, along with its patents, are unique and can create a successful business model. Best Oxygen started its sales with a modest amount of inventory in March and generated revenue of $82,000. It is currently March 31, 2013, and the following table reflects actual sales for March and the sales departments projected sales for the next five months.

Month	Sales (US$)
March (Actual Sales)	$82,000.00
April	$105,000.00
May	$174,000.00
June	$128,000.00
July	$105,000.00
August	$82,000.00

Additionally,

1. (1) Best Oxygen will spend $5,900 cash to buy a delivery truck on April 1.
2. (2) The Company expects to pay miscellaneous cash expenses equal to 5% of the current sales.
3. (3) The current location costs Best Oxygen $3,600 per month for rent.
4. (4) The insurance policy costs $400 per month and Best Oxygen has fully paid its one year policy on March 31, 2013. Best Oxygen will not write another check to pay for insurance prior to the expiration of the current policy. Prepaid insurance on March 31 therefore amounts to $4,800.
5. (5) Depreciation is estimated to be $1,050 per month, including the truck.
6. (6) Best Oxygen does not anticipate paying any tax expense.
7. (7) Wage expense is a fixed payment of $5,750 per month. It is paid twice a month.

The first payment is disbursed in the middle of month and the second payment falls on the first day of the following month. (Note: The first of the two payments made each month is thus the second payment from the previous month.) In addition, 15% of sales are paid as a variable commission for each salesperson. These commissions are likewise paid twice per month, first in the middle of the current month and then on the first day of the following month. (Note: For ease of calculation, assume that each commission payment is for half of the commission owed for the appropriate month.)

8. (8) Best Oxygens inventory policy is to begin a month with sufficient inventory, which it defines as a cushion of $36,000 plus 56% of the estimated current-months sales (e.g., Aprils estimated sales are the basis for the inventory target at April 1). The Company pays half of its current- month purchases and leaves the other half to be paid in the following month. The inventory balance at the beginning of March was recorded as $77,520.
9. (9) The cost of goods sold amounts to 70% of sales.
10. (10) Best Oxygens sales are generated with 70% cash and 30% on accounts receivable. These accounts receivable are collected in the following month. There are no overdue accounts and Best Oxygen anticipates this situation to continue in the near future.
11. (11) Best Oxygens only available credit line is from founder Smith, who agreed to lend the Company money at 1.5 percent interest per month to cover any monthly shortage of cash for the next two years. On March 31, 2013, he put $22,000 cash into the Companys checking account in exchange for his 100% equity position (not a loan) in Best Oxygen. An additional agreement with the founder stipulates a $22,000 minimum cash balance at the beginning of each month in Best Oxygens checking account. This means that the Company borrows from Smith (as needed) only at the end of the month, and subsequently also repays any loans at the end of the month, as conditions warrant. Interest is equal to 1.5% of the previous months ending loan balance. No loan is outstanding as of March 31, 2013.
12. (12) Best Oxygen will borrow $29,835 from Smith in April, and then three repayments will be made, one in May of $2,871, one in June of $21,199, and one in July of $5,765.
13. (13) Gross property, plant and equipment on March 31 amounts to $75,100.
14. (14) Accumulated depreciation is recorded at $29,440 on March 31.

Questions:

1. What do the monthly schedules of sales, inventory purchases and wages-and-commissions look like from April to July? (Hint: use Marchs numbers if needed.) In addition, construct a cash- budget table to explain the various items that affect monthly cash inflows and outflows under the current projection of business operations.
2. What do Best Oxygens monthly income statements look like from March to July? In addition, aggregate the line items of these monthly statements and construct an income statement for the four-month period from April to July.
3. What do Best Oxygens monthly balance sheets look like from March to July?
4. From April to July, what do Best Oxygens monthly statements of cash flows look like?
5. Profit-making ability can be seen on income statements, while the changed composition of balance sheets over time can reveal how cash is used or where it is sourced from. Regarding the cash balance at the end of July, after examining the cash impacts from income statements and balance sheets, which of these two is the major factor that affects Best Oxygens cash position in this four-month period?