Budget Project due in Week 4

This assignment is assigned in Week 3 but not due until Week 4. We will cover various topics during Week 3 and 4 which will help you to complete the project for final submission in Week 4.

Information Given:
Read the scenario below and answer the following 3 questions (be sure to scroll down). You will also need to complete the Budget on the "Income Statement & Budget" tab.Scenario:South Shore Medical Clinic is expanding its operations. As you will notice from Year 3 to Year 4, they have increased their revenue and encounted additional expenses. In addition, they have rented a new office at the end of the year so their rent expense is going to increase (they will now have two offices). In addition, they have added 2 additional staff members to payroll. Using the Income Statement, prepare a budget that takes these changes into account for the upcoming year.
Questions:
1. Using the Balance Sheet, calculate the current ratio. Comment on whether or not the ratio shows financial strength.
2. Using the Income Statement, calculate the operating margin ratio for Year 4. How well does the company measure in terms of operating efficiency?
3. Explain your budget suggestions. Do you think Revenue will increase or decrease? Do you think Expenses will increase or decrease?

Task #1: South Shore Medical Clinic is expanding its operations. As you will notice from Year 3 to Year 4, they have increased their revenue and encounted additional expenses. In addition, they have rented a new office at the end of the year so their rent expense is going to increase (they will now have two offices). In addition, they have added 2 additional staff members to payroll. Using the Income Statement below, prepare a budget that takes these changes into account for the upcoming year. Suggest the budget amounts for Year 5 in the column below.
South Shore Medical Clinic
Income Statement
For the year ending December 31, 20X4
				ACTUAL	BUDGET
Revenues:
Service Fee Revenue				$ 160,000
Total Revenues
Expenses:
Advertising Expense	$ 20,000
Shipping Expense	$ 12,000
Salaries Expense	$ 80,000
Rent Expense	$ 32,000
Utilities Expense	$ 5,200
Total Expenses
Income:
Net Income				$ 10,800
Operating Margin:

South Shore Medical Clinic
Balance Sheet
December 31, 20X4
ASSETS			LIABILITIES & NET WORTH
Current Assets			Current Liabilities
Cash	$ 30,000		Accounts Payable	$ 32,200
Accounts Receivable	$ 60,000		Current Portion - Long Term Debt	$ 65,000
Supplies	$ 10,000		Total Current Liabilities	$ 97,200
Inventory	$ 45,000
Total Current Assets	$ 145,000		Non-current Liabilities
			Long Term Debt, net of Current Portion	$ 210,000
Non-current Assets			Total Non-Current Liabilities	$ 210,000
Equipment	$ 193,000
Building	$ 200,000		NET WORTH
Total Non-current Assets	$ 393,000		Owner's Equity	$ 230,800
TOTAL ASSETS	$ 538,000		TOTAL LIABILITIES & NET WORTH	$ 538,000
Current Ratio:

South Shore Medical Clinic
Trial Balance
December 31, 20X4
	Debit	Credit
Cash	$ 30,000
Accounts Receivable	60,000
Supplies	10,000
Inventory	45,000
Equipment	193,000
Building	200,000
Accounts Payable		$ 32,200
Current Portion - Long Term Debt		65,000
Long Term Debt, net of Current Portion		210,000
Owner's Equity		220,000
Service Fee Revenue		160,000
Advertising Expense	20,000
Shipping Expense	12,000
Salaries Expense	80,000
Rent Expense	32,000
Utilities Expense	5,200
Totals	$ 687,200	$ 687,200