a. Prepare a cash budget for January, February, March, and the quarter in total. (13 marks)

b. Determine the budgeted ending balance of retained earnings as of March 31, 2022. Show all workings. (7 marks)

QUESTION 2 Bell Inc. is a distributor of computer monitors. Julie, the chief controller of Bell Inc., is preparing a master budget for the first quarter of 2022. Below are the accounting records of the last quarter of 2021: Year-Month October 2021 November 2021 December 2021 Sales $540,000 $600,000 $400,000 The selling price was $50 per unit. The cost of goods sold was 60% of sales. The net income after tax was $212,500. The balance of accounts payable as of December 31, 2021 was $70,650. The balance of retained earnings as of December 31, 2021 was $1,560,400 Julie predicts sales in January, February, and March of 2022 to be $420,000, $480,000, and $540,000, respectively. She also estimates that sales in April and May of 2022 will be 500 units higher than the prior month and sales in June of 2022 will drop by 1,500 units. All sales are on account. The collection pattern remains the same as in prior years: 50% collected in the month of sale, 40% collected in the first month following the sale, and the remaining collected in the second month following the sale. In prior years, Bell Inc. used to keep 15% of the next month's sales as ending inventory. Starting from 2022, Bell Inc. plans to maintain 10% of the next two months' sales as ending inventory, since the product market demand will likely experience abnormal fluctuations in the post-pandemic period. Bell Inc. has renewed the purchase agreement with its long-term supplier, Mountain View Corp., which will continue to sell computer monitors to Bell Inc. in 2022. As stated in the renewed agreement, Bell Inc. will pay Mountain View Corp. 80% in the month following the purchase and the remaining in the second month following the purchase. Given the rising labor cost, Mountain View Corp. will charge 25% more on each monitor sold. As a result, Bell Inc. plans to increase its selling price by 20%. Operating expenses in the first quarter of 2022 are estimated to be the following (warehouse rent and insurance will be pre-paid at the beginning of the quarter and other expenses will be paid in the month incurred except for depreciation): Advertising Shipping Salesperson salary Sales commission Warehouse rent Depreciation Utilities Insurance Office repair $8,000 per month $4 per unit sold for the first 5,000 units sold in a month and $3 per unit sold for any additional units sold in a month $13,000 per month 5% of monthly sales 15,000 per month $2,000 per month $2,100 per month $800 per month $22,500 in January As usual, income taxes are 15% of pre-tax income and are calculated at the end of each quarter and due in the first month after the quarter-end. In 2022, Bell Inc. plans to pay cash dividends of $4,800 in January and $21,500 in February and purchase two cash register machines, which cost $11,500 per unit and require cash payment. Bell Inc. has $30,000 cash on hand on December 31, 2021. The company wants to maintain a minimum cash balance of $25,000. The company maintains a 12% open line of credit for the amount of $50,000 with Sequoia Bank. The borrowing must be in increments of $1,000. The company borrows and repays on the last day of the month. The interest is accrued and paid every month