develop a Cash Budget, Income Statement and Balance Sheet.

ABC Imports, Inc. is a distribution of premium Italian wines. The firms balance sheet for July 31, 2023 is detailed below:

ABC Imports, Inc.

Balance Sheet

July 31, 2023

Assets

Cash $ 9,000

Accounts Receivable 54,000

Inventory 30,000

Buildings and equipment, net of depreciation 207,000

Total Assets $300,000

Liabilities and Shareholders Equity

Accounts Payable $ 63,000

Notes Payable 14,500

Common Stock 180,000

Retained Earnings 42,500

Total Liabilities and stockholders equity $300,000

ABC Imports is currently engaged in preparing a budget for the month of August and has put together the following relevant data:

• Sales are planned/budgeted at $200,000 for August. Of these planned sales, $ 60,000 will be for cash; the remainder will be credit sales. One-half of a months credit sales are to be collected in the month the sales are made, and the remainder is collected in the following month. All of the July 31 accounts receivable will be collected in August.
• Purchases of inventory are expected to total $120,000 during August. These purchases will all be on account. Forty (40%) of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the July 31 accounts payable to suppliers will be paid in August.
• The August 31 ending inventory balance is budgeted at $40,000.
• Selling and Administration expenses for August are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month.
• The Note Payable on the July 31 balance sheet will be paid during August, with $100 interest. (All of the interest relates to May.)
• New refrigerator storage equipment costing $6,500 will be purchased for cash during August.
• During August, the company will borrow $20,000 from its bank by giving a new Note Payable to the bank for that amount. The new note will be due in one year.

Required:

1. Calculate the expected cash collections from the customers for August.
2. Calculate the expected cash disbursements for merchandise purchases for August.
3. Prepare a Cash Budget for August.
4. Using a traditional income statement as your guide, prepare a budgeted income statement for August.
5. Prepare a budgeted balance sheet as of August 31, 2023.