Sports Fanatic Company is a retail sporting goods store that uses accrual accounting for its records. Information on Sports Fanatic's operations are as follows:
1. The store has budgeted sales at $220,000 for January and $200,000 for February.
2. It expects collections to be 60% in the month of sale and 38% in the month following the sale. It expects 2% of sales to be uncollectible.
3. Gross margin is 25% of sales.
4. It purchases a total of 80% of the merchandise for resale in the month before the month of sale and 20% in the month of sale. It makes payments for merchandise in the month after it purchases it.
5. Other expected monthly expenses to be paid in cash amount to $22,600.
6. Annual depreciation is $216,000.
7. Sports Fanatic's balance sheet at the close of business on December 31 follows.

Instructions
Prepare the budgeted balance sheet and income statement for January.

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SPORTS FANATIC COMPANY Balance Sheet December 31 Assets Cash Accounts receivable (net of $4,000 allowance for uncollectible accounts) Inventory Property, plant, and equipment (net of $680,000 of accumulated depreciation) 22,000 76,000 132,000 870,000 $1,100,000 Total assets Liabilities and Shareholders' Equit Accounts payable Common shares $ 162,000 800,000 138,000 $1,100,000 Retained earnings Total liabilities and shareholders' equity