Kiss Co.s finance manager would like to apply to the bank for a new credit line and has prepared the following assumptionsfor preparing the budgets:

1) The companys beginning cash balance on January 1 is $25,000.

2) Sales: January 80,000 units; February 100,000 units. Selling price is $5 per unit. 50% of sales are cash sales. The remaining are collected 40% in the same month, 60% in the following month.

3) Purchases: January 80,000 units; February 100,000 units. Cost per unit is $2. Purchases are paid as follows: 70% in the same month, 30% in the following month. The company sells all products purchased during a month.

4) Office administrative expenses are $80,000 per month (does not include depreciation expense) and are paid every month. Depreciation expense is budgeted at $15,000 per month

5) Shipping costs are $0.50 per unit sold. The company pays shipping costs in the month following the sale of products.

6) The company will rent a warehouse in zmit on February 1 st . Annual rental cost of $60,000 will be paid in cash on February 1 st .

7) Company will pay cash dividends of $50,000 in January.

8) Company has a $40,000 note payable outstanding to a bank. Annual interest on the note is 12% and company accrues and pays interest on a monthly basis. The note will be repaid in full at the end of February.

Required:

a) Prepare the Profit or Loss Budget for Kiss Co. for January and February.

b) Prepare the Cash Budget for Kiss Co. for January and February..