Variable selling and administrative expenses are estimated to be $13.00 per box crate sold. Fixed selling and administrative expenses are expected to total $95,000 each quarter, with $35,000 out of the total amount of $90,000 representing depreciation on the office space, furniture and equipment. Other than depreciation, all selling and administrative expenses are paid for in the quarter they occur. On June 30, 2023 the Large Box Crate Division plans to buy new machinery and equipment for $1,200,000. The new machinery and equipment will be acquired at the very end of the fiscal year, so it will not be used in production and sales during the coming year and it will not be depreciated until the following year. The Large Box Crate Division expects to pay 50% down in cash and finance the remaining 50% of the equipment cost with a note payable from a local bank with whom they do business with. No interest payable will accrue on the equipment note payable until after June 30, 2023. The division must maintain a minimum cash balance of $100,000. If after accounting for cash receipts and disbursements (including dividends) in the cash budget, the budgeted cash available cash falls below $100,000 in any quarter, the division will need to borrow cash. They have arranged a line of credit allowing it to borrow in $10,000 increments (i.e. they can borrow 10,000 or 20,000 etc. but not an odd amount). Assume borrowing will take place at the beginning of any quarter in which the available cash would otherwise be below $100,000 so that at no time during the quarter will the cash balance fall below $100,000 (after payment of interest). If there is extra cash at the end of the quarter and there is borrowing outstanding, the division should pay down principal (also in increments of $10,000). The bank charges the Division interest at the rate of 2% per quarter. Interest accrued in the quarter will be paid the first day of the next quarter (e.g. Q1s interest is not paid in cash until Q2). As a fully owned subsidiary, the Large Box Crate Division does not pay income taxes. All income taxes are charged to Tims Box Crates, the parent company. Large Box Crate Division will pay dividends of $65,000 each quarter to its corporate parent, Tims Box Crates. The dividends must be paid, even if the Large Box Crate Division has to borrow on its line of credit to make the payment The budgeted balance sheet for the Large Box Crate Division on June 30, 2022 (which is the same as the budgeted balance sheet at the beginning of business July 1, 2022) is presented below. Tims Box Crates owns 100% of the Capital Stock of the Large Box Crate Division. LARGE BOX CRATE DIVISION TIMS BOX CRATES BUDGETED BALANCE SHEET JUNE 30, 2022 ASSETS LIABILITIES & EQUITY Cash $800,000 Accounts Payable $250,000 Accounts Receivable 3,500,000 Notes Payable 0 Raw Material Inventory 275,000 Capital Stock 4,000,000 Plant and Equipment 9,500,000 Retained Earnings 9,825,000 TOTAL ASSETS $14,075,000 TOTAL LIAB. & SE $14,075,000

Ending Finished Goods Inventory Budget Quantity Cost (rate) Total Cost Ending Finished Goods Inventory (in units) Ending Finished Goods Inventory (in $) Selling and administrative Budget 1st 2nd 3rd 4th Total 60,000 75,000 60,000 85,000 280,000 Selling Expense Cash Disbursements for SG&A Ending Finished Goods Inventory (in units) Cash Budget 1st 2nd 3rd 4th Total Excess (Deficiency) of Cash Available over Disbursements Financing Cash balance, Ending Loan Balance for Interest Calculation Tim's Box Crates Pro Forma Income Statement For Year Ending 6/30/2019 Net income Assets Total Assets Liabilities and Stockholders' Equity Total Liabilities and Stockholders Equity