8. Prescott Inc. provided the following data: June July August September Net Sales 1274000 676000 1040000 780000 Purchases of merchandise (includes freight-in) 760000 650000 700000 580000 Beginning Inventory 300000 80000 210000 110000 Ending Inventory 80000 210000 110000 90000 Rent Expense 30000 30000 30000 30000 Interest Expense 4000 4000 4000 4000 Payments towards loan principal 26000 26000 26000 26000 Salaries Expense 55000 65000 65000 55000 Depreciation Expense (Office Equipment) 40000 40000 40000 40000 Prescott collects 40% of its sales in the month of sale, 35% in the month after the sale, and 25% in the second month following the sale. Bad debt expense is zero. The cash balance on September 1 is $160,000. Prescott pays 100% of merchandise purchases in the month purchased. All other costs and expenses involving payments are paid in the month incurred. Prescott makes loan payments of $30,000 per month of which $4,000 is interest and the remainder is principal. Prescott is in a special enterprise zone and pays no taxes. a. Provide Prescottâ€™s income statement for the month of August b. Calculate Prescottâ€™s cash balance at the end of September.
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