The following is available for the Newport Stationery Store:
Balance Sheet Information for September 30, 2016:
Current Assets .
Cash $12,000
Accounts Receivable 10,000
Inventory 63,600
Equipment (net) 100,000
Liabilities 0
Recent and Anticipated Sales
September $40,000
October 48,000
November 60,000
December 80,000
January 36,000
Sales: Sales are for cash (75%) and credit (25%).
Assume that all credit sales are collected within 30 days of sale. All accounts receivable on September 30 are from September sales.
Operating Costs: Rent, $750; Salaries and wages average 15% of monthly sales; other operating expenses excluding depreciation, 4%; Depreciation is $1000 per month. Assume all expenditures are paid each month.
Purchases: Newport maintains an ending merchandise inventory each month equal to next month’s sales plus $30,000. Terms on purchases are 2/10, n/30. Newport takes all discounts and treats these discounts as other income on the income statement. Gross margin averages 30% of sales.
Cash Balances: Newport must maintain a minimum cash balance of $8,000. Assume all borrowing is made on the 1st of the month and repaid at the end of the month when funds are available. Loans are made in increments of $1000 and management does not want to borrow any more than necessary. The interest rate is 6% and is repaid when funds are available.
Other Information: Newport is replacing some store fixtures and is planning on spending $600 in October and $400 in November. Newport is capitalizing these expenditures.
Required:
1. Completed the budget schedules for Newport.
2. Prepare a budgeted income statement and balance sheet for the 4th quarter 2016.