The following trial balance was drawn from the records of Havel Company as of October 1, 2010.

Required
a. Divide the class into groups, each with four or five students. Organize the groups into three sections. Assign Task 1 to the first section, Task 2 to the second section, and Task 3 to the third section.
Group Tasks
(1) Based on the following information, prepare a sales budget and a schedule of cash receipts for October, November, and December. Sales for October are expected to be $180,000, consisting of $40,000 in cash and $140,000 on credit. The company expects sales to increase at the rate of 10 percent per month. All of accounts receivable is collected in the month following the sale.
(2) Based on the following information, prepare a purchases budget and a schedule of cash payments for inventory purchases for October, November, and December. Cost of goods sold for October is expected to be $72,000. Cost of goods sold is expected to increase by 10 percent per month in November and December. Havel expects January cost of goods sold to be $89,000. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month's cost of goods sold. Seventy-five percent of accounts payable is paid in the month that the purchase occurs; the remaining 25 percent is paid in the following month.
(3) Based on the following selling and administrative expenses budgeted for October, prepare a selling and administrative expenses budget for October, November, and December. Cash payments for sales commissions and utilities are made in the month following the one in which the expense is incurred. Supplies and other operating expenses are paid in cash in the month in which they are incurred. As of October 1, no amounts were payable for either commissions or utilities from the previous month.

b. Select a representative from each section. Have the representatives supply the missing information in the following pro forma income statement and balance sheet for the fourth quarter of 2010. The statements are prepared as of December 31, 2010.

c. Indicate whether Havel will need to borrow money duringOctober.

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Cash Accounts receivable Inventory Store equipment Accumulated depreciation Accounts payable Line of credit loan Common stock Retained earnings Totals S 16,000 60,000 40,000 200,000 76,800 72,000 100,000 50,000 17.200 S316,000 316,000 Sales commissions (10% increase per month) Supplies expense (10% increase per month) Utilities (fixed) Depreciation on store equipment (fixed) Salary expense (fixed) Rent (fixed) Miscellaneous (fixed) $ 7,200 1,800 2,200 1,600 34,000 6,000 1,000 Income Statement Sales Revenue Cost of Goods Sold Gross Margin Operating Expenses Operating Income Interest Expense Net Income 357,480 193,290 (2,530) S190,760 Balance Sheet Assets S 9,082 Cash Accounts Receivable Inventory Store Equipment Accumulated Depreciation Store Equipment Book Value of Equipment $200,000 118,400 S314,682 Total Assets Liabilities Accounts Payable Utilities Payable Sales Commissions Payable Line of Credit 23,936 Equity Common Stock Retained Earnings 50,000 Total Liabilities and Equity S314,682