The CELLO Company wants a Master Budget for the next three months beginning January 1, 2009. It desired an ending minimum cash balance of $4000 each month. Sales are forecasted at average selling prices of $4 per unit. Inventories are supposed to equal 125% of the next month’s sales in UNITS, except for the end of March. The March 31 inventory in units should be 75% of the next month’s sales. (i.e. April’s sales in units). Merchandise costs are $2 per unit. Purchases during any given month are paid in full during the following month. All sales are on credit, payable within 30 days, but experience has shown that 40% of current sales are collected in the current month, 40% in the next month, and 20% in the month thereafter. Bad debts are negligible. (Ignore federal and state income taxes.) Monthly operating expenses are as follows: Wages and salaries (cash) $12,000 Miscellaneous (cash) 2,000 Rent 100 + 10% of monthly sales Insurance Expired 100 Depreciation 100 Cash dividends of $1000 are to be paid Quarterly, beginning January 15, and are declared on the 15th of the previous month. All operating expenses are paid as incurred, except insurance, depreciation, and rent. Rent of $100 is paid at the beginning of each month, and the additional rent of 10% of sales is paid quarterly on the tenth of the month following the quarter. The next settlement is due January 10 th. The CELLO Comapany plans to buy some new furniture and fixtures for $2000 cash in March. Money can be borrowed or repaid in multiples of $500, at an interest rate of 6% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing takes place at the beginning, and repayment at the END of the months in question. Money is never borrowed at the beginning and repaid at the end of the SAME month. Compute interest to the nearest dollar. (round up).

The CELLO Company Balance Sheet

12/31/08 Assets Liabilities Cash $4,000 Accounts Payable (Mdse.) $28,750 Accounts Receivable 16,000 Dividends Payable 1,000 Inventory 31,250 Rent Payable 7,000 Prepaid insurance 1,200 Total Liabilities $36,750 Fixed Assets-net 10,000 Stockholders Equity Total $62,450 Common Sock 10,700 Retained Earnings 15,000 Total 25,700 Total Liabilities & Equity $62,450

Recent and Forecasted Sales: October $30,000 November $20,000 December $20,000 January $50,000 February $55,000 March $12,000 April $36,000 Required: Prepare a Master Budget, including a budgeted balance sheet, budgeted income statement, cash flow statement, cash receipts and disbursements (cash budget), and supporting budgets and schedules for the first quarter only of 2009. Explain the roll cash flow analysis plays in the effective management of the organization. What if CELLO did not have access to a bank line of credit? What other sources of cash are available for Management to utilize to bridge cash shortfalls?

Recent and Forecasted Sales: October $30,000 November $20,000 December $20,000 January $50,000 February $55,000 March $12,000 April $36,000 Required: Prepare a Master Budget, including a budgeted balance sheet, budgeted income statement, cash flow statement, cash receipts and disbursements (cash budget), and supporting budgets and schedules for the first quarter only of 2009. Explain the roll cash flow analysis plays in the effective management of the organization. What if CELLO did not have access to a bank line of credit? What other sources of cash are available for Management to utilize to bridge cash shortfalls?

The CELLO Company wants a Master Budget for the next three months beginning January 1, 2009. It desired an ending minimum cash balance of $4000 each month. Sales are forecasted at average selling prices of $4 per unit. Inventories are supposed to equal 125% of the next month’s sales in UNITS, except for the end of March. The March 31 inventory in units should be 75% of the next month’s sales. (i.e. April’s sales in units). Merchandise costs are $2 per unit. Purchases during any given month are paid in full during the following month. All sales are on credit, payable within 30 days, but experience has shown that 40% of current sales are collected in the current month, 40% in the next month, and 20% in the month thereafter. Bad debts are negligible. (Ignore federal and state income taxes.) Monthly operating expenses are as follows: Wages and salaries (cash) $12,000 Miscellaneous (cash) 2,000 Rent 100 + 10% of monthly sales Insurance Expired 100 Depreciation 100 Cash dividends of $1000 are to be paid Quarterly, beginning January 15, and are declared on the 15th of the previous month. All operating expenses are paid as incurred, except insurance, depreciation, and rent. Rent of $100 is paid at the beginning of each month, and the additional rent of 10% of sales is paid quarterly on the tenth of the month following the quarter. The next settlement is due January 10 th. The CELLO Comapany plans to buy some new furniture and fixtures for $2000 cash in March. Money can be borrowed or repaid in multiples of $500, at an interest rate of 6% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing takes place at the beginning, and repayment at the END of the months in question. Money is never borrowed at the beginning and repaid at the end of the SAME month. Compute interest to the nearest dollar. (round up).

The CELLO Company Balance Sheet

12/31/08 Assets Liabilities Cash $4,000 Accounts Payable (Mdse.) $28,750 Accounts Receivable 16,000 Dividends Payable 1,000 Inventory 31,250 Rent Payable 7,000 Prepaid insurance 1,200 Total Liabilities $36,750 Fixed Assets-net 10,000 Stockholders Equity Total $62,450 Common Sock 10,700 Retained Earnings 15,000 Total 25,700 Total Liabilities & Equity $62,450

Recent and Forecasted Sales: October $30,000 November $20,000 December $20,000 January $50,000 February $55,000 March $12,000 April $36,000 Required: Prepare a Master Budget, including a budgeted balance sheet, budgeted income statement, cash flow statement, cash receipts and disbursements (cash budget), and supporting budgets and schedules for the first quarter only of 2009. Explain the roll cash flow analysis plays in the effective management of the organization. What if CELLO did not have access to a bank line of credit? What other sources of cash are available for Management to utilize to bridge cash shortfalls?

Recent and Forecasted Sales: October $30,000 November $20,000 December $20,000 January $50,000 February $55,000 March $12,000 April $36,000 Required: Prepare a Master Budget, including a budgeted balance sheet, budgeted income statement, cash flow statement, cash receipts and disbursements (cash budget), and supporting budgets and schedules for the first quarter only of 2009. Explain the roll cash flow analysis plays in the effective management of the organization. What if CELLO did not have access to a bank line of credit? What other sources of cash are available for Management to utilize to bridge cash shortfalls?

Monthly operating expenses are as follows:Wages and salaries (cash) $12,000Miscellaneous (cash) 2,000Rent 100 + 10% of monthly salesInsurance Expired 100Depreciation 100

are paid as incurred, except insurance, depreciation, and rent. Rent of $100 is paid at the beginning of each month, and the additional rent of 10% of sales is paid quarterly on the tenth of the month following the quarter. The next settlement is due January 10th.The CELLO Comapany plans to buy some new furniture and fixtures for $2000 cash in March. Money can be borrowed or repaid in multiples of $500, at an interest rate of 6% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing takes place at the beginning, and repayment at the END of the months in question. Money is never borrowed at the beginning and repaid at the end of the SAME month. Compute interest to the nearest dollar. (round up).

CASH BUDGETJanuary Febuary March

CASH BALANCE (Beginning) 4000 (14,225.00) 16,957.50

BORROWING 0 18500Cash BaLANCE after borrowing 4000 4275 16957.5Add Cash Collections 32,000 46,000 36,800Total cash available 36,000 50,275 53,758Less DisbursementsFor Inventory Purchases 28,125 625 12,000For Operating Expenses 14100 14100 14100Extra Rent 7000For Equipment Purchases 2000For Dividends 1000Total Disbursement 50,225 14,725 28100Excess/(Deficiency) Of Cash (14,225.00) 35,550.00 25,657.50

INTEREST 92.5 0REPAYMENT 18592.5 0Closing Balance 16,957.50 25658

Cash dividends of $1000 are to be paid Quarterly, beginning January 15, and are declared on the 15 th of the previous month. All operating expenses

are paid as incurred, except insurance, depreciation, and rent. Rent of $100 is paid at the beginning of each month, and the additional rent of 10% of sales is paid quarterly on the tenth of the month following the quarter. The next settlement is due January 10th.The CELLO Comapany plans to buy some new furniture and fixtures for $2000 cash in March. Money can be borrowed or repaid in multiples of $500, at an interest rate of 6% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing takes place at the beginning, and repayment at the END of the months in question. Money is never borrowed at the beginning and repaid at the end of the SAME month. Compute interest to the nearest dollar. (round up).

Cash dividends of $1000 are to be paid Quarterly, beginning January 15, and are declared on the 15 th of the previous month. All operating expenses

are paid as incurred, except insurance, depreciation, and rent. Rent of $100 is paid at the beginning of each month, and the additional rent of 10% of sales is paid quarterly on the tenth of the month following the quarter. The next settlement is due January 10th.The CELLO Comapany plans to buy some new furniture and fixtures for $2000 cash in March. Money can be borrowed or repaid in multiples of $500, at an interest rate of 6% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing takes place at the beginning, and repayment at the END of the months in question. Money is never borrowed at the beginning and repaid at the end of the SAME month. Compute interest to the nearest dollar. (round up).

The CELLO Comapany plans to buy some new furniture and fixtures for $2000 cash in March. Money can be borrowed or repaid in multiples of $500, at an interest rate of 6% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing takes place at the beginning, and repayment at the END of the months in question. Money is never borrowed at the beginning and repaid at the end of the SAME month. Compute interest to the nearest dollar. (round up).

The CELLO Comapany plans to buy some new furniture and fixtures for $2000 cash in March. Money can be borrowed or repaid in multiples of $500, at an interest rate of 6% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing takes place at the beginning, and repayment at the END of the months in question. Money is never borrowed at the beginning and repaid at the end of the SAME month. Compute interest to the nearest dollar. (round up).

The CELLO Comapany plans to buy some new furniture and fixtures for $2000 cash in March. Money can be borrowed or repaid in multiples of $500, at an interest rate of 6% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing takes place at the beginning, and repayment at the END of the months in question. Money is never borrowed at the beginning and repaid at the end of the SAME month. Compute interest to the nearest dollar. (round up).

Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products approached the company’s bank late in the current year seeking short-term financing, he was told that money was very tight and that any borrowing over the next year would have to be supported by a detailed statement of cash collections and disbursements. The treasurer also was told that it would be very helpful to the bank if borrowers would indicate the quarters in which they would be needing funds, as well as the amounts that would be needed, and the quarter in which repayments could be made.Since the treasurer is unsure as to the particular quarters in which bank financing will be needed, he has assembled the following information to assist in preparing a detailed cash budget:a. Budgeted sales and merchandise purchases for next year, as well as actual sales and purchases for the last quarter of the current year, are:MerchandiseSales PurchasesCurrent year Fourth quarter actual $200,000 $126,000Next year First quarter estimated $300,000 $186,000 Second quarter estimated $400,000 $246,000 Third quarter estimated $500,000 $305,000 Fourth quarter estimated $200,000 $126,000

b. The company normally collects 65% of a quarter’s sales before the quarter ends and another 33% in the following quarter. The remainder is uncollectible. This pattern of collections is now being experienced in the current year’s fourth-quarter actual data.c. Eighty percent of a quarter’s merchandise purchases are paid for within the quarter. The remainder is paid in the following quarter.d. Operating expenses for next year are budgeted at $50,000 per quarter plus 15% of sales. Of the fixed amount, $20,000 each quarter is depreciation.e. The company will pay $10,000 in dividends each quarter.f. Equipment purchases of $75,000 will be made in the second quarter, and purchases of $48,000 will be made in the third quarter. These purchases will be for cash.g. The Cash account contained $10,000 at the end of the current year. The treasurer feels that this represents a minimum balance that must be maintained.h. Any borrowing will take place at the beginning of a quarter, and any repayments will be made at the end of a quarter at an annual interest rate of 10%. Interest is paid only when principal is repaid. All borrowings and all repayments of principal must be in round $1,000 amounts. Interest payments can be in any amount. (Compute interest on whole months, e.g., 1/12, 2/12)i. At present, the company has no loans outstanding.Required:

1. Prepare the following by quarter and in total for next year:a. A schedule of expected cash collections

Recent and Projected Sales PurchasesIV Q-Actual $200,000 126000 Q I- Estimates 300,000 186000 Q II- Estimates 400,000 246000 Q III- Estimates 500,000 305000 Q IV- Estimates 200,000 126000

Cash collections during Q1 to QIV

Cash Sales in June = 65% of the SalesCollections from Accounts receivables

TOTAL COLLECTIONS

Cash payments for merchandize during Q1 to QIV

Cash PurchasesPayments made to payables

TOTAL Payments

Expected cash disbursements for operating expenses, by quarter and in total, for next year

Operating expenses

CASH BALANCE (Beginning)Loan takenAdd Cash CollectionsTotal cash availableLess DisbursementsFor PurchasesFor Operating ExpensesFor Equipment PurchasesDividend paymentsTotal DisbursementExcess/(Deficiency) Of Cash

INTERESTREPAYMENTClosing Balance

3. Prepare a cash budget, by quarter and in total, for next year. Show clearly in your budget the quarter(s) in which borrowing will be necessary and the quarter(s) in which repayments can be made, as requested by the company’s bank.

Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products approached the company’s bank late in the current year seeking short-term financing, he was told that money was very tight and that any borrowing over the next year would have to be supported by a detailed statement of cash collections and disbursements. The treasurer also was told that it would be very helpful to the bank if borrowers would indicate the quarters in which they would be needing funds, as well as the amounts that would be needed, and the quarter in which repayments could be made.Since the treasurer is unsure as to the particular quarters in which bank financing will be needed, he has assembled the following information to assist in preparing a detailed cash budget:a. Budgeted sales and merchandise purchases for next year, as well as actual sales and purchases for the last quarter of the current year, are:

b. The company normally collects 65% of a quarter’s sales before the quarter ends and another 33% in the following quarter. The remainder is uncollectible. This pattern of collections is now being experienced in the current year’s fourth-quarter actual data.c. Eighty percent of a quarter’s merchandise purchases are paid for within the quarter. The remainder is paid in the following quarter.d. Operating expenses for next year are budgeted at $50,000 per quarter plus 15% of sales. Of the fixed amount, $20,000 each quarter is depreciation.

f. Equipment purchases of $75,000 will be made in the second quarter, and purchases of $48,000 will be made in the third quarter. These purchases will be for cash.g. The Cash account contained $10,000 at the end of the current year. The treasurer feels that this represents a minimum balance that must be maintained.h. Any borrowing will take place at the beginning of a quarter, and any repayments will be made at the end of a quarter at an annual interest rate of 10%. Interest is paid only when principal is repaid. All borrowings and all repayments of principal must be in round $1,000 amounts. Interest payments can be in any amount. (Compute interest on whole months, e.g., 1/12, 2/12)

Q1 Q2 Q3 Q4 Annual195000 260000 325000 130000

66000 99000 132000 165000

$261,000 $359,000 $457,000 $295,000 $1,372,000

Q1 Q2 Q3 Q4 Annual

148800 196800 244000 10080025200 37200 49200 61000

$174,000 $234,000 $293,200 $161,800 $863,000

Expected cash disbursements for operating expenses, by quarter and in total, for next year

Q1 Q2 Q3 Q4

75000 90000 105000 60000 $330,000

CASH BUDGET FOR Q1 to Q4

Q1 Q2 Q3 Q4$10,000 12,000.00 (38,000.00) 9,600.00

48,000.00 1000261,000 359,000 457,000 295,000271,000 371,000.00 467,000.00 305,600.00

174,000 234,000 293,200 161,80075000 90000 105000 60000

75000 4800010000 10000 10000 10000

259,000 409,000 456,200 231,800 12,000.00 (38,000.00) 10,800.00 73,800.00

1200 1225 - 49,000.00

12,000.00 (38,000.00) 9,600.00 23,575.00

3. Prepare a cash budget, by quarter and in total, for next year. Show clearly in your budget the quarter(s) in which borrowing will be necessary and the quarter(s) in which repayments can be made, as requested by the company’s bank.

Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products approached the company’s bank late in the current year seeking short-term financing, he was told that money was very tight and that any borrowing over the next year would have to be supported by a detailed statement of cash collections and disbursements. The treasurer also was told that it would be very helpful to the bank if borrowers would indicate the quarters in which they would be needing funds, as well as the amounts that would be needed, and the quarter in which repayments could be made.

b. The company normally collects 65% of a quarter’s sales before the quarter ends and another 33% in the following quarter. The remainder is uncollectible. This pattern of collections is now being experienced in the current year’s fourth-quarter actual data.

h. Any borrowing will take place at the beginning of a quarter, and any repayments will be made at the end of a quarter at an annual interest rate of 10%. Interest is paid only when principal is repaid. All borrowings and all repayments of principal must be in round $1,000 amounts. Interest payments can be in any amount. (Compute interest on whole months, e.g., 1/12, 2/12)

3. Prepare a cash budget, by quarter and in total, for next year. Show clearly in your budget the quarter(s) in which borrowing will be necessary and the quarter(s) in which repayments can be made, as requested by the company’s bank.

Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products approached the company’s bank late in the current year seeking short-term financing, he was told that money was very tight and that any borrowing over the next year would have to be supported by a detailed statement of cash collections and disbursements. The treasurer also was told that it would be very helpful to the bank if borrowers would indicate the quarters in which they would be needing funds, as well as the amounts that would be needed, and the quarter in which repayments could be made.

h. Any borrowing will take place at the beginning of a quarter, and any repayments will be made at the end of a quarter at an annual interest rate of 10%. Interest is paid only when principal is repaid. All borrowings and all repayments of principal must be in round $1,000 amounts. Interest payments can be in any amount. (Compute interest on whole months, e.g., 1/12, 2/12)

Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products approached the company’s bank late in the current year seeking short-term financing, he was told that money was very tight and that any borrowing over the next year would have to be supported by a detailed statement of cash collections and disbursements. The treasurer also was told that it would be very helpful to the bank if borrowers would indicate the quarters in which they would be needing funds, as well as the amounts that would be needed, and the quarter in which repayments could be made.

Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products approached the company’s bank late in the current year seeking short-term financing, he was told that money was very tight and that any borrowing over the next year would have to be supported by a detailed statement of cash collections and disbursements. The treasurer also was told that it would be very helpful to the bank if borrowers would indicate the quarters in which they would be needing funds, as well as the amounts that would be needed, and the quarter in which repayments could be made.

Pro-Forma Income Statement

Gamma Manufacturing, Inc., is a manufacturer of electric pencil sharpeners. The following is

information regarding Gamma Manufacturing for the fiscal year-end, May 31, 2009:

Assume a tax rate of 33%. Prepare a pro-forma income statement for the year ended May 31,

2009, for Gamma Manufacturing, Inc. (Note that Gamma Manufacturing does not have work in-

process inventory.)

Beginning finished goods inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,000

Ending finished goods inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,000

Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,000

Sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,000

Direct materials used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,000

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,000

Manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,000

Gamma Manufacturing, Inc., is a manufacturer of electric pencil sharpeners. The following is

Assume a tax rate of 33%. Prepare a pro-forma income statement for the year ended May 31,

2009, for Gamma Manufacturing, Inc. (Note that Gamma Manufacturing does not have work in-

MONTHLY BUDGETGross Salary 54000

LessFederal Income taxes 13500FICA taxes 4131Net take home pay 36369

Less Annual ExpensesEMI payments 16500Other Monthly expenses 13260

Net Surplus 6609

Q2. It will take around : 20000/6609

3.026176 years to pay for the down payment

Personal Budgeting George Marcus, a recent college graduate, has been hired by Taylor Corporation at a salary of $54,000 per year. In anticipation of his salary, George purchased a $20,000 new ski boat and will pay for it at a rate of $425 per month, including interest, for five years. He also rented a condominium for $600 a month and bought a car on account for $350 a month. In addition, George figures that his other monthly expenses will be: Food expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $250 Clothing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Entertainment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Gas and other car expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 Utilities expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 1. On the assumption that George also pays income and FICA taxes of 25 and 7.65%, respectively, prepare his monthly budget. 2. George plans to save enough money for a down payment on a house. If a $20,000 down payment is needed, how long will it take him to save the needed amount? (For this exercise, ignore interest on savings, and assume that George does not have any savings at the present time.)

Gross Salary 36500

LessFederal Income taxes 7300State taxes 2609.75FICA taxes 2792.25Net take home pay 23798

Less Union Savings 1825

Net Disposable Income 21973

Less Annual ExpensesFour monthly payments 900Monthly expenses 11580

Net Surplus 9493

Personal Budgeting Jennifer Swartz works as an interior decorator for Modern Fashion Corporation. Her annual salary is $36,500. Of that amount, 20% is withheld for federal income taxes, 7.15% for state taxes, 7.65% for FICA taxes, and contribution the United Way. 5% deposited directly into a company union savings. Jennifer has four monthly payments: $225 for her $80 for furniture, $rent, and to repay college loans. Jennifer’s other monthly expenses approximately: Food expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . $250 Clothing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100 Entertainment expense . . . . . . ………………………. . 125 Utilities expense . . . . …………………………………. . . 80 Insurance expense . . …………………………………... . 30 Gas and maintenance expenses on car . . . . . . . . . . . 180 Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . . . 200 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . $965 Prepare both a monthly budget and an annual budget for Jennifer that identifies gross salary, net take-home pay, net disposable income, and net surplus or deficit.

Personal Budgeting Jennifer Swartz works as an interior decorator for Modern Fashion Corporation. Her annual salary is $36,500. Of that amount, 20% is withheld for federal income taxes, 7.15% for state taxes, 7.65% for FICA taxes, and contribution the United Way. 5% deposited directly into a company union savings. Jennifer has four monthly payments: $225 for her $80 for furniture, $rent, and to repay college loans. Jennifer’s other monthly expenses approximately: Food expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . $250 Clothing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100 Entertainment expense . . . . . . ………………………. . 125 Utilities expense . . . . …………………………………. . . 80 Insurance expense . . …………………………………... . 30 Gas and maintenance expenses on car . . . . . . . . . . . 180 Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . . . 200 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . $965 Prepare both a monthly budget and an annual budget for Jennifer that identifies gross salary, net take-home pay, net disposable income, and net surplus or deficit.

Recent and Forecasted Sales:

October $30,000 November $20,000 December $20,000

January $50,000 February $55,000 March $12,000

April $36,000

All sales are on credit, payable within 30 days, but experience has shown that 40% of current sales are collected in the current month, 40% in the next month, and 20% in the month thereafter. Bad debts are negligible. (Ignore federal and state income taxes.)in the current month, 30% in the next month, and 10% in the month thereafter.

Schedule of Expected Sales

November December January FebuaryTotals Sales 20,000 20,000 50,000 55,000Cash Sales 8,000 8,000 20,000 22,000Credit Sales 12,000 12,000 30,000 33,000Quantity 5000 5000 12500 13750

Schedule of Expected Cash Collection

November December January FebuaryFrom Cash Sales 20,000 22,000From Credit Sales 8,000 20,000From Credit Sales 4,000 4,000Total Cash Collected 32,000 46,000

Inventories are supposed to equal 125% of the next month’s sales in UNITS, except for the end of March. The March 31 inventory in units should be 75% of the next month’s sales. (i.e. April’s sales in units). Merchandise costs are $2 per unit. Purchases during any given month are paid in full during the following month.

Inventory Purchases Budgets

November December January FebuaryEnding Inventory in Q 15625 17188 3750Beginning Inventory in Q 15625 15625 17188Sales 5000 12500 13750Required Purchases 5,000 14,063 313Purchases in Value 10000 28125 625Cost of Goods Sold 12,500 13,750

Expected Cash Disbursements for Purchases

January Febuary March

10,000 28,125 625

INCOME STATEMENT FOR THE QUARTER ENDED 31st MARCH

IN$SALES 117,000

LESS COST OF GOODS SOLD (29,250)

GROSS PROFIT 87,750

OPERATING EXPENSES (49,300)

INSURANCE (300)

PROFIT BEFORE DEPRECIAITON 38,150

DEPRECIATION (300)

Profit After DEPRECIAITON 37,850

Interst (93)

Profit 37,758

DIVIDEND (1,000)

Retained Earning 36,758

BALANCE SHEET FOR THE QUARTER ENDED 31st MarchIN$ IN$

CASH 25658

ACCOUNTS RECEIVABLE 18200

INVENTORY 13500

BUILDING & EQUIPMENT 11700

Unexpired Insurance 900

ACCOUNTS PAYABLE 12000

RETAINED EARNING 51758

Common stock 10700

All sales are on credit, payable within 30 days, but experience has shown that 40% of current sales are collected in the current month, 40% in the next month, and 20% in the month thereafter. Bad debts are negligible. (Ignore federal and state income taxes.)

March Ist Quarter12,000 117,0004,8007,2003000

March Ist Quarter4,80022,00010,00036,800Accounts Receivable 7200

1100018200

Inventories are supposed to equal 125% of the next month’s sales in UNITS, except for the end of March. The March 31 inventory in units should be 75% of the next month’s sales. (i.e. April’s sales in units). Merchandise costs

Inventory Purchases Budgets

March April Ist Quarter675037503000 90006,000120003,000 29250

Expected Cash Disbursements for Purchases

38,750Accounts Payable 12000

All sales are on credit, payable within 30 days, but experience has shown that 40% of current sales are collected in the current month, 40% in the next month, and 20% in the month thereafter. Bad debts are negligible. (Ignore federal and state income taxes.)