A Read aloud V Draw 52 Chapter 23 Master Budgets and Planning Near the end of 2011, the management of Simid Sports Co., a merchandising company, prepared the fol lowing estimated statement of financial position for December 31, 2011, Problem 23-5A Preparation of a complete master budget C2 P1 P2 SIMID SPORTS COMPANY Estimated Statement of Financial Position December 31, 2011 $ 18.000 262,500 75.000 355.500 $270.000 33.750 236.250 5591.750 Assets Cash Accounts receivable Inventory Total current set Equipment accumulated depreciation Total assets Liabilities and Equity Accounts payable Bank loan payable Taxes payable (due 3/15/2012) Totalliss Share capital ordinary Retained earning Total shareholders' equity Tocal abilities and equity $180,000 7.500 45.000 $232.500 214.250 120.000 359,150 3591,750 To prepare a master budget for January, February, and March of 2012, management gathers the following information a. Simid Sports' single product is purchased for $10 per unit and resold for 555 per unit. The expected inventory level of 2.500 units on December 31, 2011 is more than management's desired level for the next month's expected sales in units). Expected sales are: January, 3.500 A Read aloud V Draw Toe Body To prepare a master budget for January February, and March of 2012, management gates the following information a. Simid Sports' single product is purchased for $30 per unit and resold for $55 per unit. The expected inventory level of 2.500 units on December 31, 2011, is more than management's desired level for 2012, which is 20% of the next month's expected sales (in its). Expected sales are January 3.500 units: February 4,500 units March, 5.500 units, and April, 3.000 units b. Cash sales and credit sales represent 23d75%, respectively, of total sales of the credit sales, 60% is collected in the first month after the month of sale and 40% in the second month after the month of sale. For the December 31, 2011, accounts receivable balance, 562,500 is collected in January and the remaining $200,000 is collected in February c. Merchandise purchases are paid for as follows: 2016 in the first month after the month of purchase and 805 in the second month after the month of purchase. For the December 31, 2011, accounts payable balance, $40,000 is paid in January and the remaining 5140,000 is paid in February d. Sales commissions equal to 20% of sales are paid each month Sales salaries (excluding commission are $10,000 per year e. General and administrative salaries are $72,000 per year. Maintenance expense equals $1,000 per month and is paid in cash 1. Equipment reported in the December 31, 2011, Matement of financial position was purchased in January 2011. It is being depreciated over eight years under the straight line method with no residual value. The following amounts for new equipment purchases are planned in the coming quarter January, 518,000, February, 48.000, and March 14,400. This equipment will be depreciated under the straight line method over eight years with no residual value. A full mooth depreciation is taken for the month in which equipment is purchased 9. The company plans to acquire and at the end of March at a cost of $75.000, which will be paid with cash on the last day of the month h. Simid Sports has a working arrangement with its bank to obtain additional loans as needed. The inter estrate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $12.500 in each month 1. The income tax rate for the company is 405. Income taxes on the first quarter's income will not be paid until April 15