Response to the following problem:
Wheels, exotic car dealership. Suppose that its Miami office projects that Inc., is an 20X7 quarterly sales will increase by three % in quarter 1, by four % in quarter 2, by six % in quarter 3, and by five % in quarter 4. Management expects operating expenses to be eighty percent; of revenues during each of the first two quarters, 79% of revenues during the third quarter, and 81% during the fourth. The office manager expects to borrow $100,000 on July 1, with quarterly principal payments of $10,000 beginning on September 30 and interest paid at an annual rate of 13%. Assume that fourth-quarter 20X6 sales were $4,000,000.
Prepare a budgeted income statement for each of the four quarters of 20X7 and for the entire year.
a. Management expects to sell equipment that cost $14,000 at a gain of $2,000. Accumulated depreciation on this equipment is $7,000.
b. Management expects to sell 7,500 cases of water in August and 9,200 in September. Each case sells for $12. Cash sales average 30% of total sales, and credit sales make up the rest. Three-fourths of credit sales are collected in the month of sale, with the balance collected the following month.
c. The company pays rent and property taxes of $4,200 each month. Commissions and other selling expenses average 25% of sales. Aqua Pure pays two-thirds of commissions and other selling expenses in the month incurred, with the balance paid in the following month.