1. Suppose the company has just the opposite news and now expects unit sales for August, September, and October to be double (200%) the original estimates. What effect will this have on the companys net income and borrowing? Explain your findings.

Sales Budget
	July	August	September	Total
Expected Sales (Units)	1600	1400	1500	4500
Average Selling price	$ 196	$ 196	$ 196
`Expected Sales	$ 3,13,600	$ 2,74,400	$ 2,94,000	$ 8,82,000

Merchandise Purchase Budget
	July	August	September	Total
Expected Sales (Units)	1600	1400	1500	4500
Add : Desired Ending Inventory	560	600	480
Total Units required	2160	2000	1980	6140
Less : Beginning Inventory	640	560	600
Units to be Purchased	1520	1440	1380	4340
Cost per unit	$ 110	$ 110	$ 110
Total Purchase cost	$ 1,67,200	$ 1,58,400	$ 1,51,800	$ 4,77,400

Schedule of Cash Collections
	July	August	September	Quarter
From Accounts receivable
May Sales	$ 82,320			$ 82,320
June Sales	$ 98,000	$ 58,800		$ 1,56,800
From Budgeted Sales
July Sales	$ 62,720	$ 1,56,800	$ 94,080	$ 3,13,600
August Sales		$ 54,880	$ 1,37,200	$ 1,92,080
September Sales			$ 58,800	$ 58,800
Total Cash Collections	$ 2,43,040	$ 2,70,480	$ 2,90,080	$ 8,03,600

Cash Budget
	July	August	September	Quarter
Beginning Balance	$ 12,480	$ 8,000	$ 8,000	$ 12,480
Cash Collections	$ 2,43,040	$ 2,70,480	$ 2,90,080	$ 8,03,600
Total Cash Available	$ 2,55,520	$ 2,78,480	$ 2,98,080	$ 8,16,080
Cash Disbursements
Purchases	$ 1,36,400	$ 1,67,200	$ 1,58,400	$ 4,62,000
Variable Cash Expenses	$ 78,400	$ 68,600	$ 73,500	$ 2,20,500
Fixed Cash Expenses	$ 40,000	$ 40,000	$ 40,000	$ 1,20,000
Total Cash Disbursements	$ 2,54,800	$ 2,75,800	$ 2,71,900	$ 8,02,500
Preliminary Ending Balance	$ 720	$ 2,680	$ 26,180	$ 13,580
Financing
Borrowings	$ 7,280	$ 5,320		$ 12,600
Repayment			$ -12,600	$ -12,600
Interest			$ -298	$ -298
Total Financing	$ 7,280	$ 5,320	$ -12,898	$ -298
Ending Balance	$ 8,000	$ 8,000	$ 13,282	$ 13,282

It is assumed, borrowing is made at end of month, and interest has been calculated accordingly

Income Statement
Sales Revenue	$ 8,82,000
Cost of Goods Sold	$ 4,95,000
Gross Profit	$ 3,87,000
Expenses
Variable Expenses	$ 2,20,500
Fixed Expenses	$ 1,20,000
Depreciation	$ 6,000
Interest	$ 298
Total Expenses	$ 3,46,798
Net Income	$ 40,202

Balance Sheet, Sep 30
Cash	$ 13,282
Accounts receivable	$ 3,17,520
Merchandise inventory (480 units)	$ 52,800
Fixed assets (net)	$ 1,24,000
Total assets	$ 5,07,602
Accounts payable (merchandise)	$ 1,51,800
Owners equity	$ 3,55,802
Total Liabilities and equity	$ 5,07,602