1 yoru Company, on vilice supplies specially suit, prepares a una quarterly UOSIS. THE willy vala have veck assembled to assist in preparing the master budget for the first quarter: a. As of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances: Cash I Accounts receivable. Debits $ 48,000 224,000 Credits Buildings and equipment (net) Inventory 60,000 370,000 Accounts payable Common stock. Retained earnings $ 93,000 500,000 109,000 $ 702,000 $ 702,000 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March April $ 280,000 $400,000 $ 600,000 $ 300,000 $ 200,000 Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales. The company's gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.) Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month: advertising. $70,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,000 fer the quarter. f. Each month's ending inventory should equal 25% of the following month's cost of goods sold. g. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid in the following month. h. During February, the company will purchase a new copy machine for $1,700 cash. During March, other equipment will be purchased for cash at a cost of $84,500. 1. During January, the company will declare and pay $45,000 in cash dividends. J. Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. Required: Using the data above, complete the following statements and schedules for the first quarter: 1. Schedule of expected cash collections: 2-a. Merchandise purchases budget 2-b. Schedule of expected cash disbursements for merchandise purchases: 3. Cash budget: 4. Prepare an absorption costing income statement for the quarter ending March 31. nare a halance cheat as of March 31 Complete the schedule of expected cash collections. Cash sales Credit sales Total collections Schedule of Expected Cash Collections January February $ 80,000 $120,000 $ 224,000 320,000 March Quarter 60,000 $260,000 480,000 1,024,000 $1,284,000 $ 304,000 $ 440,000 $540,000 Complete the merchandise purchases budget. Merchandise Purchases Budget January February March Quarter $ 240,000 $360,000 $ 180,000 $ 780,000 Budgeted cost of goods sold Add desired ending inventory Total needs Less beginning inventory Required purchases $400,000 sales x 60% cost ratio = $240,000. +$360,000 x 25% = $90,000. 90,000+ 45,000 30,000 330,000 405,000 210,000 780,000 60,000 90,000 45,000 $ 270,000 $315,000 $165,000 $780,000 Schedule of Expected Cash Disbursements for Merchandise Purchases December purchases January purchases February purchases March purchases January February March Quarter $ 93,000 $ 93,000 135,000 135,000 270,000 157,500 157,500 315,000 82,500 82,500 Total cash disbursements for purchases $ 228,000 $292,500 $240,000 $760,500 Sales Cost of goods sold: Beginning inventory Purchases For the Quarter Ended March 31 Goods available for sale Ending inventory Gross margin Selling and administrative expenses: Salaries and wages Advertising Shipping Depreciation Other expenses Net operating income Interest expense Net income + 0 0 0 0 0 $ 0 Current assets: Cash Accounts receivable Inventory Total current assets Buildings and equipment, net Total assets Current liabilities: Accounts payable Stockholders' equity: Common stock Liabilities and Stockholders' Equity Retained earnings 0 $ SA 0 0 Total liabilities and stockholders' equity S 0 13