1.Blue Nile Company's newly hired accountant has persuaded management to

prepare a

master budget to aid financial and operating decisions. The planning horizon is only three months, January to March. Sales in December (20x3) were Br. 40, 000. Monthly sales for the first four months of the next year (20x4) are forecasted as follows:

JanuaryBr. 50, 000

February 80, 000

March60, 000

April50, 000

Normally 60% of sales are on cash and the remainders are credit sales. All credit sales are collected in the month following the sales. Uncollectible accounts are negligible and are to be ignored.

Because deliveries from suppliers and customer demand are uncertain, at the end of any month Blue Nile wants to have a basic inventory of Br. 20, 000 plus 80% of the expected cost of goods to be sold in the following month. The cost of merchandise sold averages 70%of sales. The purchase terms available to the company are net 30 days. Each month's purchase are paid as follows:

50% during the month of purchase and,

50% during the month following the purchases.

Monthly expenses are:

Wages and commissions.....................Br. 2, 500 + 15%of sales, paid as incurred.

Rent expense...............................................Br. 2, 000 paid as incurred.

Insurance expense.........................................Br.200 expiration per month.

Depreciation including truck............................Br.500 per month

Miscellaneous expense..................................5% of sales, paid as incurred.

In January, a used truck will be purchased for Br. 3, 000 cash. The company wants a minimum cash balance of Br. 10, 000 at the end of each month. Blue Nile can borrow cash or repay loans in multiples of Br. 1, 000. Management plans to borrow cash more than necessary and to repay as promptly as possible. Assume that the borrowing takes place at the beginning, and repayment at the end of the months in question. Interest is paid when the related loan is repaid. The interest rate is 18% per annum. The closing balance sheet for the fiscal year just ended at December 31, 20x3, is:

Blue Nile Company

Balance Sheet

December 31, 20x3

ASSETS

Current assets:

Cash Br. 10, 000

Account receivable16,000

Merchandise inventory 48, 000

Unexpired insurance 1, 800Br.75, 800

Plant assets:

Equipment, fixture and otherBr.37, 000

Accumulated depreciation12, 80024, 200

Total assetsBr.100, 000LIABILITIES AND OWNERS' EQUITY

Liabilities:

Accounts payableBr.16, 800

Accrued wages and commissions payable4, 250 Br.21, 050

Capital:

Owners' equity78, 950

Total liabilities and owners' equityBr.100, 00

Instructions:

a.Using the data given above, prepare the following detailed schedules for the first quarter of the year:

a)Sales budget

b)Cash collection budget

c)Purchase budget

d)Disbursement for purchases

e)Operating expenses budget

f)Disbursement for operating expenses