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The Cold Mountain Furnace Company is a retail store with locations across the eastern United States. The companys projected income statement for its first year

The Cold Mountain Furnace Company is a retail store with locations across the eastern United States. The companys projected income statement for its first year of operations, which ends December 31, 2018, and its projected balance sheet as of December 31, 2018, are shown below:

Sales

$ 4,000,000

Cost of Goods Sold

2,300,000

Gross Margin

1,700,000

Selling and Administrative Expenses

800,000

Net Income

$ 900,000

Cash

$ 660,000

Accounts receivable

150,000

Inventory

400,000

Property, plant, and equip. (net of accum. deprec.)

200,000

Total assets

$1,410,000

Accounts payable

$ 110,000

Common stock

400,000

Retained earnings

900,000

Total liabilities and owners equity

$1,410,000

The company is currently forecasting its 2019 operational year. Anticipated Projections for 2019 follow (continues onto next page):

Budgeted Sales

First quarter

$1,050,000

Second quarter

$1,100,000

Third quarter

$1,150,000

Fourth quarter

$1,100,000

All sales are made on credit. Sales are collected in two portions, consisting of 85% in the quarter of the sale and 15% in the quarter following the sale. All of the accounts receivable as of December 31, 2018, will relate to sales in the fourth quarter of 2018.

The cost of goods sold is expected to increase to 60% of sales in 2019. Inventory is purchased in the quarter of expected sale. 80% of inventory purchases are paid for in the quarter of purchase and 20% are paid for in the quarter following purchase. Safety stock is maintained at all times.

The accounts payable balance as of December 31, 2018, will relate to inventory purchases made in the fourth quarter of 2018.

Selling and administrative costs are expected to increase to $225,000 per quarter in 2019. Of this quarterly amount, $10,000 is depreciation expense of the property, plant, and equipment.

The inventory balance at the end of 2019 is expected to be $400,000.

Required:

Prepare the Cold Mountain Furnace Companys projected Income Statement and Balance Sheet for each quarterly reporting period of 2019. In addition, prepare the companys projected Income Statement and Statement of Cash Flows for the full year of 2019. Assume that the company is not subject to federal, state, or local income tax.

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