36. Merchandising Company Master Budget. Big Apple Sporting Goods is a retail store that sells a variety of sports equipment. The company's fiscal year ends on December 31. Information to be used for the operating budget this coming year follows. Sales and Merchandise Purchases Budget Information . Sales for this coming year ending December 31 are expected to be as follows: First quarter $600,000 Second quarter $650,000 Third quarter $660,000 Fourth quarter $800,000 . Cost of goods sold is 40 percent of sales (this is the first line of the merchandise purchases budget). Merchandise inventory is maintained at a level equal to 20 percent of the next quarter's cost of goods sold. Merchandise inventory at the end of the fourth quarter budget period is estimated to be $55,000. Selling and Administrative Budget Information . Management estimates all selling and administrative costs are fixed. . Quarterly selling and administrative cost estimates for the coming year are Salaries $150,000 Rent $ 25,000 Advertising $ 40,000 Depreciation $ 18,000 Other $ 12,000Capital Expenditure and Cash Budget Information - The company plans to pay cash for property, plant, and equipment totaling $35,000 at the end of the fourth quarter. This purchase will not affect depreciation expense for the coming year. - The company expects to collect 70 percent of sales in the quarter of sale and 30 percent the quarter following the sale. Accounts receivable at the end of last year totaled $200,000, all of which will be collected during the rst quarter of this coming year. - All inventory purchases are on credit. The company expects to pay 80 percent of inventory purchases in the quarter of purchase and 20 percent the following quarter. Accounts payable at the end of last year totaled $68,000, all of which will be paid during the rst quarter of this coming year. - The cash balance at the beginning of this coming year is expected to be $90,000. Budgeted Bafance Sheet Information - Assume 30 percent of fourth quarter budgeted sales will be collected in full the following year (this represents accounts receivable at the end of the fourth quarter). - Expected account balances at the end of the fourth quarter are Property, plant, and equipment (net) $120,000 Common stock $175,000 - Actual retained earnings at the end of the last year totaled $252,000, and no cash dividends will be paid during the current budget period ending December 31. Required: 1. Prepare a quarterly sales budget. (Hint: this budget will not have any units of product, only total sales revenue.) 2. Prepare a quarterly merchandise purchases budget using the following format. All amounts are in dollars. Big Apple Sporting Goods Merchandises Purchases Budget Year Ending December 31 Quarter 1 2 3 Year 1 - Budgeted costs of goods sold Add desired ending merchandise inventory Total merchandise inventory needed Deduct beginning merchandise inventory Merchandise to be purchased 3. Prepare a quarterly selling and administrative budget 4. Prepare a quarterly budgeted income statement (Hint: cost of goods sold will be based on a percent of sales rather than a cost per unit.) 5. Prepare a quarterly capital expenditure budget 6. Prepare a quarterly cash budget (Hint: Merchandising companies have merchandise purchases rather than direct materials purchases. Merchandising companies do not have direct labor or manufacturing overhead.) 7. Prepare a budgeted balance sheet at December 31 . (Hint: merchandising companies have merchandise inventory rather than raw materials inventory or finished goods inventory.)