October sales are projected to be $390,000. Sales are projected to increase by 10% in November and another 25% in December and then return to the October level in January. . 20% of sales are made in cash while the remaining 80% are paid by credit or debit cards. The credit card companies and banks (debit card issuers) charge a 1% transaction fee, and deposit the net amount (sales price less the transaction fee) in the store's bank account daily. The store does not accept checks. Because of the payment mechanisms, there is no risk of non-payment or bad-debts. . The store's gross profit is 40% of its sales revenue. . For the next several months, the store wants to maintain an ending merchandise inventory equal to $13,000 plus 10% of the next month's cost of goods sold. All purchases for merchandise are made on account and paid in the month following the purchase. The September 30 inventory is expected to be $36,400. Expected monthly operating expenses and details about payments include the following: Wages of store workers should be $7,900 per month and are paid on the last day of each month. . Utilities expense is expected to be $1,500 per month in September, October, and November. Utilities expense is expected to be $1,700 per month during the colder months of December, January, and February. 4 All utility bills are paid the month after incurred. Property tax is $21,600 per year and is paid semiannually each December and June. . Property and liability insurance is $10,800 per year and is paid semiannually each January and July. . Depreciation expense is $192,000 per year; the straight-line method used. . Transaction fees, as stated earlier, are 1% of credit and debit card sales. . Cash dividends of $300,000 are to be paid in December. . Assume the cash balance on October 31 is $25,000. The company wants to maintain a cash balance of at least $25,000 at the end of every month. The company has arranged a line of credit with a local bank at a 5% interest rate. There is no outstanding debt as of October 31. Requirement 3. Prepare the operating expense budget for November and December. Thrifty Dollar Store Cash Payments for Operating Expenses Budget For the Months of November and December Wage expense Utilities expense Property tax expense Property and liability insuranse expense Depreciation expense Credit/Debit card fees expense Total operating expenses November December Requirement 4. Prepare the budgeted income statement for November and December. Review the budgets prepared in Requirements 1, 2, and 3. Thrifty Dollar Store Budgeted Income Statement For the Months of November and December Sales revenue Less: Cost of goods sold Gross profit Less: Operating expenses Net income November December Requirement 5. Prepare the cash collections budget for November and December. Review the sales budget prepared in Requirement 1. Thrifty Dollar Cash Collections Budget For the Months of November and December November December Cash sales Credit sales, net of fees Total cash collections Thrifty Dollar Cash Payments for Operating Expenses Budget For the Months of November and December November December Purchases of inventory, 30 day lag Cash payments for wages Cash payments for utilities Cash payments for property taxes Cash payments for dividends Property and liability insurance Total payments for operating expenses Enter any number in the edit fields and then continue to the next question. Combined Cash Budget For the Months of November and December November December Beginning cash balance Plus: Cash collections Total cash available Less: Cash payments Ending cash balance before financing Financing: Plus: New borrowings Less: Debt repayments Less: Interest payments Ending cash balance Enter any number in the edit fields and then continue to the next question. October sales are projected to be $390,000. Sales are projected to increase by 10% in November and another 25% in December and then return to the October level in January. . 20% of sales are made in cash while the remaining 80% are paid by credit or debit cards. The credit card companies and banks (debit card issuers) charge a 1% transaction fee, and deposit the net amount (sales price less the transaction fee) in the store's bank account daily. The store does not accept checks. Because of the payment mechanisms, there is no risk of non-payment or bad-debts. . The store's gross profit is 40% of its sales revenue. . For the next several months, the store wants to maintain an ending merchandise inventory equal to $13,000 plus 10% of the next month's cost of goods sold. All purchases for merchandise are made on account and paid in the month following the purchase. The September 30 inventory is expected to be $36,400. Expected monthly operating expenses and details about payments include the following: Wages of store workers should be $7,900 per month and are paid on the last day of each month. . Utilities expense is expected to be $1,500 per month in September, October, and November. Utilities expense is expected to be $1,700 per month during the colder months of December, January, and February. 4 All utility bills are paid the month after incurred. Property tax is $21,600 per year and is paid semiannually each December and June. . Property and liability insurance is $10,800 per year and is paid semiannually each January and July. . Depreciation expense is $192,000 per year; the straight-line method used. . Transaction fees, as stated earlier, are 1% of credit and debit card sales. . Cash dividends of $300,000 are to be paid in December. . Assume the cash balance on October 31 is $25,000. The company wants to maintain a cash balance of at least $25,000 at the end of every month. The company has arranged a line of credit with a local bank at a 5% interest rate. There is no outstanding debt as of October 31. Requirement 3. Prepare the operating expense budget for November and December. Thrifty Dollar Store Cash Payments for Operating Expenses Budget For the Months of November and December Wage expense Utilities expense Property tax expense Property and liability insuranse expense Depreciation expense Credit/Debit card fees expense Total operating expenses November December Requirement 4. Prepare the budgeted income statement for November and December. Review the budgets prepared in Requirements 1, 2, and 3. Thrifty Dollar Store Budgeted Income Statement For the Months of November and December Sales revenue Less: Cost of goods sold Gross profit Less: Operating expenses Net income November December Requirement 5. Prepare the cash collections budget for November and December. Review the sales budget prepared in Requirement 1. Thrifty Dollar Cash Collections Budget For the Months of November and December November December Cash sales Credit sales, net of fees Total cash collections Thrifty Dollar Cash Payments for Operating Expenses Budget For the Months of November and December November December Purchases of inventory, 30 day lag Cash payments for wages Cash payments for utilities Cash payments for property taxes Cash payments for dividends Property and liability insurance Total payments for operating expenses Enter any number in the edit fields and then continue to the next question. Combined Cash Budget For the Months of November and December November December Beginning cash balance Plus: Cash collections Total cash available Less: Cash payments Ending cash balance before financing Financing: Plus: New borrowings Less: Debt repayments Less: Interest payments Ending cash balance Enter any number in the edit fields and then continue to the next question.