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.


1. Completed the budget schedules for Newport.

2. Prepare a budgeted income statement and balance sheet for the 4th quarter 2016.


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