1.It is time for the company to begin its annual budget preparation for its upcoming fiscal year, which ends on December 31, 2021.They are in need of temporary assistance in their accounting office, and have hired you to carry out the task of preparing the budgets.The company prepares quarterly budgets, and then from this information prepares an annual budget.

The following information:

1) Sales for the first quarter of 2021 are expected to be 6,200 units, and sales are expected to grow at a rate of 12% of the previous quarter's sales for all of 2021 and 2022.Selling price is expected to remain constant at $50 per unit.

2) Based on past experience, sales are expected to be 30% cash sales, and 70% sales on account.Jung expects that 5% of the sales on account will never be collected, but the other 95% of sales on account will be collected in full in the quarter following the quarter of sale.Accounts receivable are expected to be $180,000 at the start of the first quarter in 2021 and will be collected in full.

3) In order to meet expected demand at the beginning of the next quarter, Jung wants ending inventory equal to 22% of the next quarter's budgeted sales.Inventory on hand at the end of 2020 (the start of the first quarter for 2021) is expected to be 1,200 units.

4) Jung is a wholesaler, and purchases its inventory from the manufacturer at a cost of $36 per unit.This is the cost paid in the last quarter of 2020 and cost is expected to remain constant throughout the next five quarters.

5) Jung purchases from the manufacturer on account, and has three weeks to pay.Accordingly, Jung expects to pay 70% of its inventory purchases in the quarter of purchase, and the remaining 30% in the quarter following the quarter of purchase.Jung anticipates owing $50,000 to suppliers at the start of the first quarter in 2021.

6) Jung incurs selling and administrative costs as follows:

i)Jung pays its selling staff fixed salaries plus commission.The fixed salaries total $32,000 per quarter, and the commission is 5% of sales revenue.Salaries and commissions are paid in full in the quarter the costs are incurred.

ii) Advertising costs are fixed at $6,500 per quarter and are paid in cash.

iii) Office salaries are expected to be $10,000 per quarter, again paid in cash each quarter.

iv) Property taxes for 2021 are expected to be $16,000; payment is due in the third quarter and Jung So Min intends to pay the entire year's assessment during that quarter.

v) Utilities are expected to be constant at $3,500 per quarter.

vi) The annual insurance premium is expected to be $4,500 and will be paid in the first quarter.

7) Jung expects to have an opening cash balance of $5,200 at the start of the first quarter of 2021.

8) Jung has decided that it must maintain a minimum cash balance of $5,000.It has arranged a line of credit with the bank, but must borrow in $1,000 increments.The loan must also be paid in $1,000 increments. Jung So Min's policy is to make payments on the line of credit if there is sufficient cash available, again ensuring the cash balance is not below $5,000.Interest expense is calculated at a rate of 8% per year and is paid as accrued each quarter.It is expected that the line of credit balance advanced and outstanding at the end of 2020 will be $2,000.

9) Jung has common shares with a book value of $100,000 outstanding at the end of 2020.It does not intend to issue or repurchase any common shares during the year. The retained earnings is expected to be $156,200 at the end of 2020.Dividends of $15,000 are expected to be declared and paid in the fourth quarter.

10)Jung expects to have fixed assets with a net book value of $85,000 at the end of 2020.Equipment purchases are expected to be $38,000 in the first quarter, and $23,000 in the fourth quarter.Depreciation is calculated on a straight-line basis.The expected useful life remaining on the assets on hand at the end of 2020 is 5 years; the new assets are expected to be used for 10 years.Jung So Min begins depreciating new assets in the quarter after they are purchased.

11)Jung pays corporate tax at a rate of 25%.No instalments are planned for 2021; the balance owning will be paid in full on filing the 2021 tax return in 2022.

Using a five-column format, with one column for each quarter and then one column for the year:

a) Prepare the sales budget.

Inventory purchase budget in Units Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted for The Year Sales in Units 6,200 6.944 7,777 8.711 29.632 Add:Desired ending inventory 1,528 1,711 1,916 2,146 6,519 (Next Quarter Sales*22%) (6944*22% ) (7777*22% ) (8711*22% ) (9756*22% ) Total units needed 7.728 8.655 9.694 10,857 36,933 Less: beginning inventory 1,200 1,528 1,711 1,916 1.916 Inventory purchase budget in Units 6,528 7,127 7,983 8.941 30,578 Cost per unit of inventory purchase 36 36 36 36 36 Purchases, in dollars 234.996 256,572 287,374 321,871 1,100.814Particulars Quarter 1 Quarter 2 Quarter 3 Quarter 4 Cash Sales [30% of sales] $93,000 $104.160 $116.659 $130.658 Cash collections from credit sales $171.000 $206,150 $230.888 $258,595 Collection from sales $264,000 $310,310 $347,547 $389,253Expected cash disbursements-Inventory purchases Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted for The Year Inventory purchase budget in Units 234996 256572 287374 321871 1100814 Opening accounts payable 50000 50000 Cash payment, current quarter(70%) 164498 179600 201162 225310 770570 (234996*70%) (256572*70%) (287374*70%) (321871*70%) Cash payment, from previous quarter(30%) 70499 76972 86212 233683 (234996*30%) (256572*30%) (287374*30%) Total expected cash payments-Inventory purchases 214498 250099 278133 311522 1054252Particulars Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total (Year) Expected Sales (units) 5200 6944 7777 8711 29632 Selling perice per Unit 50 50 S 50 50 50 Sales Value 310.000 347,200 388.864 435,528 $1,481,592