The projected October 31, 2011, balance sheet for Blanco Co. follows:

ASSETS

Cash .............................. $28,000,000

Accounts Receivable (net of Allowance for Uncollectibles of $3,000,000).... 57,000,000

Inventory ............................. 52,500,000

Property, Plant, and Equipment (net of Accumulated Depreciation of $37,500,000) 112,500,000

Total Assets ........................ $250,000,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts Payable ........................$165,000,000

Common Stock ......................... 120,000,000

Retained Earnings (deficit) .................... (35,000,000)

Total Liabilities and Stockholders’ Equity .............$250,000,000

Additional information is as follows:

• Sales for November and December are budgeted at $330,000,000 and $360,000,000, respectively.

• Collections are expected to be 70 percent in the month of sale, 28 percent in the following month, and 2 percent uncollectible.

• The company’s gross profit is projected at 30 percent of sales.

• Purchases each month are 70 percent of the following month’s projected sales.

Purchases are paid in full in the month following the purchase.

• Other monthly cash expenses are $46,500,000. Monthly depreciation is $15,000,000.

a. Prepare a budgeted income statement for November 2011.

b. Prepare a budgeted balance sheet for November 2011.

c. Describe any special problems this company may encounter because of its weak balance sheet. Recommend actions the firm might take to improve the balance sheet.