ACCT C102 Group Green A Group Project I: Master Budget Near the end of 2022, the management of LuLu Toy Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2022. LULU TOY COMPANY December 31, 2022 Assets Estimated Balance Sheet Liabilities and Equity Cash $35,500 Accounts payable $360,000 Accounts receivable 520,000 Bank loan payable 15,000 Inventory Total current assets Taxes payable (due 95,000 3/15/2023) 650,500 Total liabilities 90,000 $465,000 Equipment $541,000 Less accumulated 67,625 depreciation Total assets Common stock 473,375 Retained earnings Total stockholders' equity $1,123,875 Total liabilities and equity 472,500 186,375 658,875 $1,123,875 To prepare a master budget for January, February, and March of 2023, management gathers the following information. a. Lulu Toy Company's single product is purchased for $20 per unit and resold for $57 per unit. The expected inventory level of 4,750 units on December 31, 2022, is more than management's desired level for 2023, which is 20% of the next month's expected sales (in units). Expected sales are: January, 7,250 units; February, 9,250 units; March, 11,000 units; and April, 10,000 units. b. Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 70% is collected in the first month after the month of sale and 30% in the second month after the month of sale. For the December 31, 2022, accounts receivable balance, $130,000 is collected in January and the remaining $390,000 is collected in February. c. Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2022, accounts payable balance, $90,000 is paid in January and the remaining $270,000 is paid in February. d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $66,000 per year. e. General and administrative salaries are $156,000 per year. Maintenance expense equals $2,100 per month and is paid in cash. f. Equipment reported in the December 31, 2022, balance sheet was purchased in January 2022. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $35,000; February, $95,000; and March, $28,500. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full month's depreciation is taken for the month in which equipment is purchased. g. The company plans to acquire land at the end of March at a cost of $170,000, which will be paid with cash on the last day of the month. h. Lulu Toy Company has a working arrangement with its bank to obtain additional loans as needed. The interest rate 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 $25,413 in each month. i. The income tax rate for the company is 30%. Income taxes on the first quarter's income will not be paid until April 15. Summer 2022 Group Project I Requirements: Prepare a master budget for each of the first three months of 2023; include the following component budgets (show supporting calculations as needed directly behind that budget, and round amounts to the nearest dollar): 1.) Monthly sales budgets (showing both budgeted unit sales and dollar sales). 2.) Monthly merchandise purchases budgets. 3.) Monthly selling expense budgets. 4.) Monthly general and administrative expense budgets. 5.) Monthly capital expenditures budgets. This will not be in your text so find other sources. 6.) Monthly cash budgets. 7.) Budgeted income statement for the entire first quarter (not for each month). 8.) Budgeted balance sheet as of March 31, 2023 9 Prepare a written analysis summarizing your findings. Please include: i.) Financial ratios in your discussion of the company's financial position. ii.) What accounting recommendations do you have for the new company? iii.) What business recommendations do you have to help the new company? iv.) What did you learn from preparing a Master Budget? Do you find this to be an easy or challenging project? Why? Gather each member's thoughts and report separately, not as a group consensus. v.) Do you feel you could prepare a master budget for a company on your own? Gather each member's thoughts and report separately, not as a group consensus. Reports should be neatly compiled in the above order and include a cover page with all team member names. Grading Criteria Spelling, grammar, and formatting errors reduce the grade by one point each. Projects can initially be completed in Google Docs, Microsoft Excel, Word, or other word or spreadsheet software. Regardless of how your project was initially created, each of the above items shall then be posted as a page in Canvas within your group in the exact order as above. This group project is worth 130 points of your overall grade. Participation by all members is absolutely required. Your grade on these projects will be composed of a group grade (determined by your instructor) and an individual grade (determined by your group members). How the assignment is divided up is up to each group, however each student must present a portion on the recorded presentation. Each group member should also present at least one item from requirement number 9 above. The entire recorded presentation must be completed using Pronto only. You will be assessed on your collaboration so it must be done using Pronto also. On the due date, you will submit a confidential peer evaluation form for which you will grade each of your team members. You will also be posting your progress, etc... in the Discussion by your respective Group. You may not change groups