please check the attachment

Scenario
Timbers Department Store prepares its budgets quarterly. The following information is available for use in planning the second quarter budgets for 2022.
TIMBERS DEPARTMENT STORE
Balance Sheet
March 31, 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
Actual and forecasted sales for selected months in 2022 are as follows:
    Sales Revenue by Month
    Month
    Sales Revenue
    January
    $70,000
    Fe
uary
    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 incu
ed. 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 bo
owed 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 bo
owing 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 bo
owed.  Any repayment of past bo
owings can only occur if the monthly ending cash balance is greater than $10,000 (after partial or full repayment of past bo
owing).
With the above information you and your group can now prepare the second quarter budget for Timbers Department Store.
Memo and Appendices
The memo should address the following issues about the budgeting process:
· Describe why budgeting is necessary. Why do we start with the sales budget?
· What is budgetary slack (see Module 22 page 21)? Give examples and explain why we should expect it to occur. How can we minimize slack in our organization?
· 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.
· What insights have you taken from this budgeted quarter that can apply to future budgets of Timbers?
The appendices should provide a reference source for the memo. It is strongly recommended that you use a spreadsheet program when developing the appendices.  Our required textbook has a good example of budgeting on pages 22-7 through 22-14; have you read/studied this section of the textbook yet?  The following items (think spreadsheet tables) must be included in your appendices:
· Prepare a purchases budget for each month of the second quarter ending June 30, 2022.
· Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2022. Do not include bo
owings.
· Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2022. Do not include repayments of bo
owings.
· Prepare an overall cash budget for each month of the second quarter ending June 30, 2022. Include budgeted bo
owings and repayments.
· Prepare a pro forma income statement for each month of the second quarter ending June 30, 2022.
· Prepare a pro forma budgeted balance sheet as of June 30, 2022.
· Other appendices as needed.
Hint: It is to your group’s benefit to supply your instructor with a spreadsheet the can be used for what-if analysis. That is, can I use your spreadsheet to adjust sales amounts, assumptions, and so on to see the effect of the changes on the budget?  If you can, your team will earn a higher score.  You do not need full automation! [Only automate the loan bo
owings
epayments calculation if you understand the =IF(logical_test,value_if_true,value_if_false) feature of Excel.]