The company is completing its third year of operations and is preparing to build its master budget for the fourth quarter of the year. The budget will detail each months activity and the total for the quarter. The master budget will be based on the following information:

Sales were budgeted at $202,000 for September. Expected sales are $208,000 for October, $207,000 for November, $210,000 for December, and $204,000 for January 2018.

The gross margin is 40% of sales.

Sales are projected to be 80% in cash and 20% on credit. Credit sales are collected in the month following the sale. The September accounts receivable are a result of the September credit sales. There are no bad debts.

Each months ending inventory should equal 75% of the next months budgeted cost of goods sold.

Merchandise Inventory Purchases are paid as follows; 85% of a months inventory purchases are paid for in the month of purchase; the remaining 15% is paid for in the following month. The accounts payable at September 30 are the result of September purchases of inventory.

Monthly operating expenses are as follows: commissions are 10% of sales; rent is $3,000 per month, other operating expenses (excluding depreciation) are 15% of sales. Assume these expenses are paid in cash each month. Deprecation is $1,500 per month.

November equipment purchases cost $8,000, and December equipment purchases cost $3,000. All equipment purchases are paid for in cash in the month purchased.

Income tax is estimated to be 28% of operating income. Estimated taxes are accrued each month and paid in cash in the last month of the quarter.

Management established a new policy this quarter, and would like to maintain a minimum cash balance of at least $50,000 at the end of each month. The company has an agreement with a local bank that allows them to borrow in increments of $1,000 at the end of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded (only paying interest on the principal). They would, as far as it is able, repay the loan plus accumulated interest in the last month of the quarter.

The projected balance sheet as of September 30, is as follows:

Assets	September 30
Cash	$12,000.00
Accounts Receivable	40,400.00
Inventory	93,600.00
Plant & Equipment, net	121,750.00
Total assets	$267,750.00
Liabilities & Equity
Accounts Payable	$18,585.00
Retained Earnings	249,165.00
Total liabilities & equity	$267,750.00

	October	November	December	Total
Budgeted Sales Revenue
Cash Sales
Credit Sales
Total Sales Revenue
Budgeted Cost of Goods Sold
Desired Ending Inventory
Total Needs
Beginning Inventory
Required Purchases
Variable Operating Expenses:
Commissions
Other Operating Expenses
Total Variable Operating Expenses
Fixed Operating Expenses:
Rent
Depreciation
Total Fixed Operating Expenses
Total Operating Expense
Sales
Cost of Goods Sold
Gross Margin
Operating Expenses
Operating Income
Interest Expense
Income Taxes
Net Income
Collections of:
Cash Sales
Credit Sales
Total Collections
Payments of:
Current Month Purchases
Prior Month Purchases
Total Payments - Merchandise Inventory Purchases
Commissions
Rent
Other Operating Expenses
Total Payments - Operating Expenses
Beginning Cash Balance
Cash Collections
Cash Available
Cash Payments:
Merchandise Inventory Purchases
Operating Expenses
Equipment Purchase
Income Taxes
Ending Cash Balance before Financing
New Borrowings
Debt Repayments
Interest Payments
Ending Cash Balance after Financing
Cash
Accounts Receivable
Inventory
Plant & Equipment, net
Total assets
Accounts Payable
Retained Earnings
Total liabilities & equity