accounting question please help 410374

Joe Peterson is the founder and majority shareholder of Zipali, Inc., wholesaler of chemicals. Joe started the business in his home a few years ago. For the most part, Joe has been able to manage his company quite well. For the first few years he grew his company, but cash requirements caused by expansion and increased demand for his product has forced Joe to re think his current day to day planning activities.

More importantly, Joe is considering taking on some investors and/or taking a loan from the bank with which he has been working. He has been somewhat concerned by his lack of cash forecasting. He is convinced that he needs to do some cash budgeting, but has neither the time nor the desire to put serious effort into this project.

The following information was made available to you from the company records:

Other data:

a) All sales are on credit with 45% collected in the month of the sale and 55% in the month after the sale.

b) Cost of sales is 65% of sales.

c) Variable period costs (other than sales commissions, in item d below) are 4% of sales and are paid in the month incurred.

d) Sales commissions apply to all sales and are paid in the month after sales at a rate of 9% of sales.

e) Inventory is maintained at the sales requirements for the next two months’ budgeted cost of goods sold.

f) Purchases are paid in the month after the purchase (receipt).

g) Total fixed expenses are $140,000 per month of which $80,000 is for depreciation.

Required:

1) Using the above information, prepare a budget worksheet (i.e., the subsidiary budgets).

2) Prepare a budgeted Income Statement for the three month period ending March 31, 2012.

3) Prepare a budgeted Balance Sheet at March 31, 2012 and try to prove Retained Earnings.