Reference no: EM13351953

Perfect Gas Corporation supplies compressed gases to business customers. Data regarding the store's operations given:

• Sales are budgeted at $345,000 for November, $230,000 for December, and $320,000 for January.
• Collections are expected to be 60 percent in the month of sale, 34% in the month subsequent the sale, and 6% uncollectible.
• The cost of goods sold is 70% of sales.
• The company desires ending merchandise inventory to same 80% of the subsequent month's cost of goods sold. Payment for merchandise is made in the month subsequent the purchase.
• Other monthly expenses to be paid in cash are $12,000.
• Monthly depreciation is $16,000.
• Equipment purchases of $110,000 were paid in cash in November.
• Dividends of $35,000 were declared and paid in December.
• Any borrowings must be in $1,000 increments at 7 percent interest. Consider interest accrues at the starting of the month and is paid at the end of the month. The company must maintain a minimum cash balance of $5,000.
• Ignore income taxes.

Prepare the subsequent budgets for November and December and total for the two months in good form in excel.

a. Create a Schedule of Expected Cash Collections

b. Purpose a Merchandise Purchases Budget

c. Plan Cash Budgets

d. Prepare Budgeted Income Statements

e. Purpose a Budgeted Balance Sheet

Purpose a letter/memo to the company's CEO with specific recommendations regarding your budget.