Store is a local discount store with the following information:

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October sales are projected to be $360,000.
	Sales are projected to increase by 10% in November and another 25% in December and then return to the October level in January.
	25% of sales are made in cash while the remaining 75% are paid by credit or debit cards. The credit card companies and banks (debit card issuers) charge a 2% 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 20% of its sales revenue.
		For the next several months, the store wants to maintain an ending merchandise inventory equal to $20,000 plus 15% 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 $63,200.
	Expected monthly operating expenses and details about payments include the following:
		Wages of store workers should be $7,200 per month and are paid on the last day of each month.
		Utilities expense is expected to be $700 per month in September, October, and November.
		Utilities expense is expected to be $2,100 per month during the colder months of December, January, and February.
		All utility bills are paid the month after incurred.
		Property tax is $16,800 per year and is paid semiannually each December and June.
		Property and liability insurance is $20,400 per year and is paid semiannually each January and July.
		Depreciation expense is $180,000 per year; the straight-line method used.
		Transaction fees, as stated earlier, are 2% of credit and debit card sales.
	Cash dividends of $280,000 are to be paid in December.
	Assume the cash balance on October 31 is $65,000. The company wants to maintain a cash balance of at least $65,000 at the end of every month.
	The company has arranged a line of credit with a local bank at a 4% interest rate. There is no outstanding debt as of October 31.

Question content area bottom

Part 1

Requirement 1. Prepare the sales budget for

November

and

December.

Discount Plus Store
Sales Budget
For the Months of November and December
	November	December
Cash sales
Credit sales
Total sales

Part 2

Requirement 2. Prepare the cost of goods sold, inventory, and purchases budget for

November

and

December.

Discount Plus Store
Cost of Goods Sold, Inventory, and Purchases Budget
For the Months of November and December
	November	December
Cost of goods sold
Plus: Desired ending inventory
Total inventory required
Less: Beginning inventory
Purchases

Part 3

Requirement 3. Prepare the operating expense budget for

November

and

December.

Discount Plus Store
Cash Payments for Operating Expenses Budget
For the Months of November and December
	November	December
Wage expense
Utilities expense
Property tax expense
Property and liability insuranse expense
Depreciation expense
Credit/Debit card fees expense
Total operating expenses

Part 4

Requirement 4. Prepare the budgeted income statement for

November

and

December.

Review the budgets prepared in Requirements 1, 2, and 3.

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Discount Plus Store
Budgeted Income Statement
For the Months of November and December
	November	December
Sales revenue
Less: Cost of goods sold
Gross profit
Less: Operating expenses
Net income

Part 5

Requirement 5. Prepare the cash collections budget for

November

and

December.

Review the sales budget prepared in Requirement 1.

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Discount Plus

Cash Collections Budget

For the Months of November and December

	November	December
Cash sales
Credit sales, net of fees
Total cash collections

Part 6

Requirement 6. Prepare the cash payments budget for

November

and

December.

(If no cash payment is made, make sure to enter "0" in the appropriate cell.)Review the budgets prepared in Requirements 1, 2, and 3.

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Discount Plus

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

Part 7

Requirement 7. Prepare the combined cash budget for

November

and

December.

(Enter a "0" for any zero amounts. Use parentheses or a minus sign for negative cash balances and financing payments.)Review the cash collections and cash payments budgets prepared in Requirements 5 and 6.

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Discount Plus

Combined Cash Budget

For the Months of November and December

	November
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

December