Thornton Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, year 1. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks.

October sales are estimated to be $400,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 30 percent per month.

Salary expense (fixed) $ 19,500 Sales commissions 4 % of Sales Supplies expense 2 % of Sales Utilities (fixed) $ 2,900 Depreciation on store fixtures (fixed)* $ 5,500 Rent (fixed) $ 6,300 Miscellaneous (fixed) $ 2,700

The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases.

October November December Schedule of Cash Payments Budget for Inventory Purchases Payment of current month's accounts payable Payment for prior month's accounts payable Total budgeted payments for inventory $0 $0 $0

Thornton borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $27,000 cash cushion. Prepare a cash budget.

Cash Budget October November December Section 1: Cash Receipts Beginning cash balance $0 Add: Cash receipts Total cash available Section 2: Cash Payments For inventory purchases For selling and administrative expenses Interest expense Total budgeted disbursements Section 3: Financing Activities Surplus (shortage) Borrowing (repayment) Ending cash balance