Please answer the question in the file.
Timbers Department Store prepares its budgets quarterly. The following information is available for use in planning the second quarter budgets for 2022. Assets Liabilities and Stockholders' Equity Cash $4,000 Accounts payable $31,000 Accounts receivable 31,000 Dividends payable 15,000 Inventory 36,000 Prepaid insurance 3,000 Stockholders' equity 53,360 Fixtures 25,360 Total assets $99,360 Total liabilities and equity $99,360 TIMBERS DEPARTMENT STORE Balance Sheet March 31, 2022 Actual and forecasted sales for selected months in 2022 are as follows: Sales Revenue by Month Month Sales Revenue January $70,000 February 60,000 March 50,000 April 60,000 May 70,000 June 90,000 July 100,000 August 90,000 Monthly operating expenses are as follows: Category Amount Wages and salaries $27,000 Depreciation 300 Utilities 1,500 Rent 3,000 Cash dividends of $15,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance and depreciation, are paid as incurred. The prepaid insurance is for six more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month’s cost of goods sold. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Cash Management Policy: Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. For budgeting purposes the company uses simple interest for all interest calculations. The company desires a minimum cash balance of $4,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed. Any repayment of past borrowings can only occur if the monthly ending cash balance is greater than $10,000 (after partial or full repayment of past borrowing). Question: Give a summary of the just prepared budget for Timbers Department Store. Make sure you address the adequacy of the Cash Management Policy, and if necessary, suggest reasonable changes to this policy. Figures Assets Cash$4,000 Accounts receivable31,000 Inventory36,000 Prepaid insurance3,000 Fixtures25,360 Total assets$99,360 Liabilities and Stockholders' Equity Accounts payable$31,000 Dividends payable15,000 Stockholders' equity53,360 Total liabilities and equity$99,360 CategoryAmount Wages and salaries$27,000 Depreciation300 Utilities1,500 Rent3,000 MonthSales Revenue January$70,000 February60,000 March50,000 April60,000 May70,000 June90,000 July100,000 August90,000 Budget Appendix BTimbers Department Store Cash Reciepts Schedule for second quarter of 2022 Sale RevenueCash collection pattern JanuaryFebuaryMarchAprilMayJuneTotal Jan$70,000$35,000$28,000$7,000 Feb$60,000$30,000$24,000$6,000 Mar$50,000$25,000$20,000$5,000 Apr$60,000$30,000$24,000$6,000 May$70,000$35,000$28,000 June$90,000$45,000 Total cash receipts in month$35,000$58,000$56,000$56,000$64,000$79,000$199,000 Appendix ATimbers Department Store Purchase Budget for second quarter of 2022 AprilMayJuneTotalJuly Budgeted sales$60,000$70,000$90,000$220,000$100,000 Current COGS$30,000$35,000$45,000$110,000$50,000 Desired ending inventory$42,000$54,000$60,000$60,000 Total needed$72,000$89,000$105,000$170,000 Less beginning inventories-$36,000-$42,000-$54,000-$36,000 Required purchase$36,000$47,000$51,000$134,000 Appendix CTimbers Department Store Cash Disbursements Schedule for second quarter of 2022 AprilMayJuneTotal Inventory purchase$31,000$36,000$47,000 Wages and salaries$27,000$27,000$27,000 Utilities$1,500$1,500$1,500 Rent$3,000$3,000$3,000 Cash dividend$15,000 Total disbursement$77,500$67,500$78,500$223,500 Appendix DTimbers Department Store Overall Cash Budget for second quarter of 2022 AprilMayJuneTotal Cash balance, beginning$4,000$4,500$4,000$4,000 Collection on Sale$56,000$64,000$79,000$199,000 Cash available for operations$60,000$68,500$83,000$203,000 Disbursements for operations-$77,500-$67,500-$78,500-$223,500 Ending cash before borrowings or repayments-$17,500$1,000$4,500-$20,500 New loans$22,000$3,000$25,000 Repayments$ - Interest accured (1%)$220$250$250$720 Interest paid$ - Net cash from financing$22,000$3,000$ -$25,000 Cash balance, ending$4,500$4,000$4,500$4,500 Appendix ETimbers Department Store Budgeted Income Statement for second quarter ending June 30, 2022 Sales$220,000 Cost of goods sold-$110,000 Gross profit$110,000 Other expenses Wages and salaries$81,000 Utilities$4,500 Rent$9,000 Depreciation$900 Insurance$1,500-$96,900 Income from operations$13,100 Interest expense-$720 Net income from operations$12,380 Appendix FTimbers Department Store Budgeted Balance Sheet June 30, 2022 AssetsLiabilities Current assetsCurrent liabilities Cash$4,500Accounts payable$51,000 Accounts receivable, net$52,000Loan payable$25,000 Inventory$60,000Interest payable$720 Prepaid insurance$1,500$118,000Dividend payable$15,000$91,720 Fixed assets Fixtures$25,360Stockholders' Equities Less accumulated depreciation-$900$24,460Retained earnings$50,740 Total assets$142,460Total liabilities and stockholders' equities$142,460