The following information is for retail stationery store:

1. Balance sheet information as of December 31, 2011

Current assets

Cash Rs. 12,000

Accounts receivable 10000

Inventory 63600

Equipment net 100,000

Liabilities as of December 31, 2011 None

2. Recent and anticipated sales

December Rs.40,000

January 48,000

February 60,000

March 80,000

April 36,000

3. Credits sales: Sales are 75% cash and 25% on credit. Assume that credit accounts are all allocated within 30 days from sale. The accounts receivable on December (25% of Rs. 40,000).

4. Gross margin averages 30% of revenues. Store treats cash discounts on purchases in the income statement as other income.

5. Operating costs: salaries and wages average 15% of monthly revenues; rent, 5% other operating costs, excluding depreciation, 4%. Assume that these costs are disbursed each month. Depreciation is Rs. 1,000 per month.

6. Purchases: Store keeps a minimum inventory of Rs. 30,000. The policy is to purchase each month additional inventory in the amount necessary to provide for the following months sales. Terms on purchases are 2/10, net/30 (payments on purchases are to be made in 30 days; a 2% discount is available in the payment is made within 10 days after purchase). Assume that payments are made in the month of purchase and that all discounts are taken. Purchases are 70% of the next months sales.

7. Light fixtures; in January, Rs. 600 is spent for light fixtures, and in February, Rs. 400 is to be expended for this purpose. These amounts are to be capitalized.

Assume that minimum cash balance of Rs. 8,000 must be maintained. Assume also that all borrowing is effective at the beginning of the month and all repayments are made at the end of the month of repayment. Loans are repaid when sufficient cash is available. Interest is paid only at the time of repaying principal. The interest rate is 18% per year. The owner of store does not want to borrow any more cash than is necessary and wants to repay as soon as cash is available.

On the basis of the preceding facts, prepare

1. Monthly cash receipts budget
2. Monthly cash payments for purchases budget
3. Monthly Cash Disbursements for Operating Costs budget
4. Monthly total Cash Disbursements budget
5. Budgeted Cash Receipts and Disbursements
6. Budget for required financing
7. What do you think is the most logical type of loan needed by Retail Stationary Store?
8. Prepare a budgeted income statement for the fourth quarter and a budgeted balance sheet as of December 31. Ignore income taxes.
9. Some simplifications have been included in this problem what complicating factors might arise in a typical business situation?