Posh International, Inc., is an exotic car dealership.Suppose that its Los Angeles office projects that 2011 quarterly sales will increase by 3% in Quarter 1, by 4% in Quarter 2, by 6% in Quarter 3, and by 5% Quarter 4. Management expects operating expenses to be 80% of revenues during each of the first two quarters, 79% of revenues during the third quarter, and 81% during the fourth. The office manager expects to borrow $500,000 on July 1, with quarterly principal payments of $10,000 beginning on September 30 and interest paid at an annual rate of 14%. Assume that fourth-quarter 2010 sales were $7,000,000.
1. Prepare a budgeted income statement for each of the four quarters of 2011 and for the entire year.
The principal payment is part of the cash flow budget but not ...
The principal payment is part of the cash flow budget but not the income statement. Interest expense is adjusted for the principal payments as the loan balance goes down by them. See formulas in the cells.
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