Question

Dollar Plus Store is a local discount store with the following​ information:

OctoberOctober sales are projected to be $ 400 comma 000$400,000.
times•	Sales are projected to increase by 1010​% in NovemberNovember and another 2020​% in DecemberDecember and then return to the OctoberOctober level in JanuaryJanuary.
times•	2525​% of sales are made in cash while the remaining 7575​% are paid by credit or debit cards. The credit card companies and banks​ (debit card​ issuers) charge a 22​% transaction​ fee, and deposit the net amount​ (sales price less the transaction​ fee) in the​ store's bank account daily. The store does not accept checks. Because of the payment​ mechanisms, there is no risk of​ non-payment or​ bad-debts.
	times•	The​ store's gross profit is 3030​% of its sales revenue.
	times•	For the next several​ months, the store wants to maintain an ending merchandise inventory equal to $ 19 comma 000$19,000 plus 1515​% of the next​ month's cost of goods sold. All purchases for merchandise are made on account and paid in the month following the purchase. The SeptemberSeptember 30 inventory is expected to be $ 61 comma 000$61,000.
times•	Expected monthly operating expenses and details about payments include the​ following:
	times•	Wages of store workers should be $ 7 comma 200$7,200 per month and are paid on the last day of each month.
	times•	Utilities expense is expected to be $ 1 comma 400$1,400 per month in SeptemberSeptember​, OctoberOctober​, and NovemberNovember.
	times•	Utilities expense is expected to be $ 1 comma 800$1,800 per month during the colder months of DecemberDecember​, JanuaryJanuary​, and FebruaryFebruary.
	times•	All utility bills are paid the month after incurred.
	times•	Property tax is $ 25 comma 200$25,200 per year and is paid semiannually each DecemberDecember and JuneJune.
	times•	Property and liability insurance is $ 18 comma 000$18,000 per year and is paid semiannually each JanuaryJanuary and JulyJuly.
	times•	Depreciation expense is $ 204 comma 000$204,000 per​ year; the​ straight-line method used.
	times•	Transaction​ fees, as stated​ earlier, are 22​% of credit and debit card sales.
times•	Cash dividends of $ 300 comma 000$300,000 are to be paid in DecemberDecember.
times•	Assume the cash balance on OctoberOctober 31 is $ 50 comma 000$50,000. The company wants to maintain a cash balance of at least $ 50 comma 000$50,000 at the end of every month.
times•	The company has arranged a line of credit with a local bank at a 44​% interest rate. There is no outstanding debt as of OctoberOctober 31.

Prepare the following budgets for

November

Homework: Chapter 9 Homework Score: 0 of 7 pts 12 of 12 (9 complete) P9-64A (similar to) HW Score: Dollar Plus Store is a local discount store with the following information: (Click the icon to view the information.) Read the requirements. November December Cash sales Credit sales Total sales Enter any number in the edit fields and then click Check Answer.

and

December​:

1.

Sales budget

2.

Cost of goods​ sold, inventory, and purchases budget

3.

Operating expense budget

4.

Budgeted income statement

5.

Cash collections budget

6.

Cash payments budget

7.

Combined cash budget

Answer 1

1. Sales Budget

Particulars	November	December
Sales
Cash Sales	110000	120000
Credit/Debit Card Sales	330000	360000
Total Sales	440000	480000

(October Sales Given, November Increased by 10% over October, December increased by 20% over October)

2. COGS, Purchase and Inventory

Particulars	November	December	Remarks
Opening Inventory	65,200	74,440	Prev month Ending Inventory
Add : Purchases	317,240	327,600	(COGS + Ending Inventory - Beginning Inventory), paid in following month
Less : Ending Inventory	74,440	61,000	(19000 + 15% of COGS of Next month)
COGS	308,000	336,000

3. Operating Expense Budget

Operating Expenses	November	December
Wages	7,200	7,200	Paid in same month
Utilities	1,400	1,800	Paid in Next month
Property Tax		12,500	Paid in December
Property and Liability Insurance			Paid in January
Depreciation	17,000	17,000	Non Cash Expense
Transaction Fee	6,600	7,200	Paid in Same month
Cash Dividends			Not an Operating Expense
Line of Credit Cost	-	-	(4% on prev month Credit Balance)
Total Expenses	32,200	45,700

5. Budgeted Income Statement

Particulars	November	December
Sales
Cash Sales	110,000	120,000
Credit/Debit Card Sales	330,000	360,000
Total Sales	440,000	480,000
Opening Inventory	65,200	69,400
Add : Purchases	312,200	327,600
Less : Ending Inevntory	69,400	61,000
COGS	308,000	336,000
Gross Profit	132,000	144,000
Operating Expenses
Wages	7,200	7,200
Utilities	1,400	1,800
Property Tax		12,500
Property and Liability Insurance
Depreciation	17,000	17,000
Transaction Fee	6,600	7,200
Line of Credit Cost	-	-
Total Expenses	32,200	45,700
Net Income	99,800	98,300

5. Cash Collection Budget

	November	December
Sales
Cash	110,000	120,000
Credit	330,000	360,000
Cash Collection	440,000	480,000

6. Cash Payment

	November	December
Purchase	284,200	312,200
Wages	7,200	7,200
Property Tax		12,500
Property and Liability Insurance
Transaction Fee	6,600	7,200
Cash Dividends		300,000
Cash Payments	298,000	639,100

7. Combined Cash Budget

	November	December
Sales
Cash	110,000	120,000
Credit	330,000	360,000
Cash Collection	440,000	480,000
Purchase	284,200	312,200
Wages	7,200	7,200
Property Tax		12,500
Property and Liability Insurance
Transaction Fee	6,600	7,200
Cash Dividends		300,000
Cash Payments	298,000	639,100
Net Cash Generated	142,000	(159,100)
Add : Beginning Cash Balance	50,000	192,000
Less : Closing Cash Balance	192,000	32,900
Line of Credit Usage to maintain $50000 cash balance	-	17,100