After graduating with a degree in business from Eastern University in Campus Town, USA, Michael Woods realized that he wanted to remain in Campus Town. After a number of unsuccessful attempts at getting a job in his discipline, Michael decided to go into business for himself. In thinking about his business venture, Michael determined that he had four criteria for the new business: 1. He wanted to do something that he would enjoy. 2. He wanted a business that would give back to the community. 3. He wanted a business that would grow and be more successful every year. 4. Realizing that he was going to have to work very hard, Michael wanted a business that would generate a minimum net income of $25,000 annually. While refl ecting on the criteria he had outlined, Michael, who had been president of his fraternity and served as an offi cer in several other student organizations, realized that there was no place in Campus Town to have custom sweatshirts made using a silk-screen process. When student organizations wanted sweatshirts for their members or to market on campus, the offi cers had to make a trip to a city 100 miles away to visit Shirts and More. Michael had worked as a part-time employee at Shirts and More while he was in high school and had envisioned owning such a shop. He realized that a sweatshirt shop in Campus Town had the potential to meet all four of his criteria. Michael set up an appointment with Jayne Stoll, the owner of Shirts and More, to obtain information useful in getting his shop started. Because Jayne liked Michael and was intrigued by his entrepreneurial spirit, she answered many of Michaels questions. In addition, Jayne provided information concerning the type of equipment Michael would need for his business and its average useful life. Jayne knows a competitor who is retiring and would like to sell his equipment. Michael can purchase the equipment at the beginning of 2013, and the owner is willing to give him terms of 50% due upon purchase and 50% due the quarter following the purchase. Michael decided to purchase the following equipment as of January 1, 2013. Hand-operated press that applies ink to the shirt cost $7,500 useful life 5 yrs. Light-exposure table cost 1,350 useful life10 yrs. Dryer conveyer belt that makes ink dry on the shirts cost 2,500 useful life 10 yrs. Computer with graphics software and color printer cost 3,500 useful life 4 yrs. Display furniture cost 2,000 useful life10 yrs. Used cash register cost 500 useful life 5 yrs. Michael has decided to use the sweatshirt supplier recommended by Jayne. He learned that a gross of good-quality sweatshirts to be silk-screened would cost $1,440. Jayne has encouraged Michael to ask the sweatshirt supplier for terms of 40% of a quarters purchases to be paid in the quarter of purchase, with the remaining 60% of the quarters purchases to be paid in the quarter following the purchase. Michael also learned from talking with Jayne that the ink used in the silkscreen process costs approximately $0.75 per shirt. Knowing that the silk-screen process is somewhat labor-intensive, Michael plans to hire six college students to help with the process. Each one will work an average of 20 hours per week for 50 weeks during the year. Michael estimates total annual wages for the workers to be $72,000. In addition, Michael will need one person to take orders, bill customers, and operate the cash register. Cary Sue Smith, who is currently Director of Student Development at Eastern University, has approached Michael about a job in sales. Cary Sue knows the offi cers of all of the student organizations on campus. In addition, she is very active in the community. Michael thinks Cary Sue can bring in a lot of business. In addition she also has the clerical skills needed for the position. Because of her contacts, Michael is willing to pay Cary Sue $1,200 per month plus a commission of 10% of sales. Michael estimates Cary Sue will spend 50% of the workday focusing on sales, and the remaining 50% will be spent on clerical and administrative duties. Michael realizes that he will have diffi culty fi nding a person skilled in computer graphics to generate the designs to be printed on the shirts. Jayne recently hired a graphics designer in that position for Shirts and More at a rate of $500 per month plus $0.10 for each shirt printed. Michael believes he can fi nd a university graphics design student to work for the same rate Jayne is paying her designer. Michael was fortunate to fi nd a commercial building for rent near the university and the downtown area. The landlord requires a one-year lease. Although the monthly rent of $1,000 is more than Michael had anticipated paying, the building is nice, has adequate parking, and there is room for expansion. Michael anticipates that 75% of the building will be used in the silk-screen process and 25% will be used for sales. Michaels fraternity brothers have encouraged him to advertise weekly in the Eastern University student newspaper. Upon inquiring, Michael found that a 30 3 30 ad would cost $25 per week. Michael also plans to run a weekly ad in the local newspaper that will cost him $75 per week. Michael wants to sell a large number of quality shirts at a reasonable price. He estimates the selling price of each customized shirt to be $16. Jayne has suggested that he should ask customers to pay for 70% of their purchases in the quarter purchased and pay the additional 30% in the quarter following the purchases. After talking with the insurance agent and the property valuation administrator in his municipality, Michael estimates that the property taxes and insurance on the machinery will cost $2,240 annually; property tax and insurance on display furniture and cash register will total $380 annually. Jayne reminded Michael that maintenance of the machines is required for the silk-screen process. In addition, Michael realizes that he must consider the cost of utilities. The building Michael wants to rent is roughly the same size as the building occupied by Shirts and More. In addition, Shirts and More sells approximately the same number of shirts Michael plans to sell in his store. Therefore, Michael is confi dent that the maintenance and utility costs for his shop will be comparable to the maintenance and utility costs for Shirts and More, which are as follows within the relevant range of zero to 8,000 shirts. Shirts Sold (first number) Maintenance Costs (second number) Utility Costs (third number) January 2,000 $1,716 $1,100 February 2,110 1,720 1,158 March 2,630 1,740 1,171 April 3,150 1,740 1,198 May 5,000 1,758 1,268 June 5,300 1,818 1,274 July 3,920 1,825 1,205 August 2,080 1,780 1,117 September 8,000 1,914 1,400 October 6,810 1,860 1,362 November 6,000 1,855 1,347 December 3,000 1,749 1,193 Michael estimates the number of shirts to be sold in the fi rst fi ve quarters, beginning January 2013, to be: First quarter, year 1 8,000 Second quarter, year 1 10,000 Third quarter, year 1 20,000 Fourth quarter, year 1 12,000 First quarter, year 2 18,000 Michael decides to establish his company as a corporation. He will invest $10,000 of his personal savings in the company. Seeing how determined his son was to become an entrepreneur, Michaels father offered to co-sign a note for an amount up to $20,000 to help Michael open his sweatshirt shop, Sweats Galore, Inc. However, when Michael and his father approached the loan offi cer at First Guarantee Bank, the loan offi cer asked Michael to produce the following budgets for 2013. Sales budget Schedule of expected collections from customers Shirt purchases budget Schedule of expected payments for purchases Silk-screen labor budget Selling and administrative expenses budget Silk-screen overhead expenses budget Budgeted income statement Cash budget Budgeted balance sheet The loan offi cer advised Michael that the interest rate on a 12-month loan would be 8%. Michael expects the loan to be taken out as of January 1, 2013. Michael has estimated that his income tax rate will be 20%. He expects to pay the total tax due when his returns are filed in 2014. Instructions Answer the following questions. Prepare a schedule of expected collections from customers. Sweats Galore, Inc. Schedule of Expected Collections from Customers For the Year Ending December 31, 2013 Quarter 1, 2, 3, 4 Accounts receivable 1/1/13 0 First quarter Second quarter Third quarter Fourth quarter Total collections

The Business Situation Screenshot Tops, Inc. After graduating with a degree in business from Rural College in Campus Town, USA, Michael Woods realized that he wanted to remain in Campus Town and start building a life for himself. After a few unsuccessful attempts at getting a job in his chosen discipline, Michael decided to start his own business. Thinking about his business venture, Michael determined that he had four criteria that were most important to him: 1. He wanted to do something that he would enjoy. 2. He wanted a business that would give back to the community. 3. He wanted a business that could grow and be more successful every year. 4. Realizing that he was going to have to work very hard, Michael wanted a business that would generate a minimum net income of at least $25,000 annually. A bit more about Michael: he was president of his fraternity and served as an officer in several other student organizations and clubs. During these experiences, he realized that there was no place in Campus Town to have custom shirts made using a silk-screen process. When student organizations wanted shirts for their members to wear or to sell for fundraising on campus, the officers had to make a trip to Big City, over 100 miles away, and visit "Shirts and More." Michael grew up in Big City and worked as a parttime employee at Shirts and More while he was in high school. Back then, he envisioned owning such a shop someday. Michael realized that a shop in Campus Town had the potential to meet all four of his criteria. He set up an appointment with Jayne Stoll, the owner of Shirts and More, to obtain information useful in getting his shop started. Michael grew up in Big City and worked as a parttime employee at Shirts and More while he was in high school. Back then, he envisioned owning such a shop someday. Michael realized that a shop in Campus Town had the potential to meet all four of his criteria. He set up an appointment with Jayne Stoll, the owner of Shirts and More, to obtain information useful in getting his shop started. Because Jayne liked Michael and was intrigued by his enterprising spirit, she was happy to answer Michael's questions and help him. Jayne provided information concerning the equipment Michael would need for his business and its average useful life. Fortunately for Michael, Jayne knows of a competitor who is retiring at the end of the year and would like to sell his equipment. Michael can purchase the equipment at the beginning of 2022 , and the retiring owner is willing to give him terms of 50% due upon purchase and 50% due at the end of the quarter following the purchase. Michael decided to purchase the following equipment as of January 1. Hand-operated press that applies ink to the shirt - Cost: \$7,500. Useful Life: 5 years Light-exposure table- Cost: \$1350. Useful Life: 10 years Dryer conveyor belt that makes ink dry on the shirts: Cost: 2,500 Useful life 10 years Computer with graphics software and color printer: Cost: 3,500 Useful life is 4 years Display furniture: Cost: 2,000 . Useful life is 10 years Used cash register: Cost: 500 Useful life is 5 years Michael has decided to use a shirt supplier recommended by Jayne. He learned that a gross1 of good-quality shirts to be silk-screened would cost $1,440. Jayne has encouraged Michael to ask the shirt supplier for terms of 40% of a quarter's purchases to be paid in the quarter of purchase, with the remaining 60% of the quarter's purchases to be paid in the quarter following the purchase as this was routine in the industry. Michael also learned from talking with Jayne that the ink used in the silk-screen process costs approximately $0.75 per shirt on average. Knowing that the silk-screen process is somewhat labor-intensive, Michael plans to hire six college students to help with the process. Each one will work an average of 20 hours per week for 50 weeks during the year. Michael estimates total annual wages for the workers at the state's current minimum wage to be $72,000 in total. In addition, Michael will need one person to take orders, bill customers, and operate the cash register. Cary Smith, who currently works in the Student Development department at Rural College, has approached Michael about a job in sales. Cary knows the officers of all the student organizations on campus. In addition, she is very active in the community and may be able to expand the business' reach. Michael thinks Cary can bring in a lot of business. In addition, she also has the administrative skills needed for the position. Because of her contacts, Michael is willing to pay Cary $1,200 per month plus a commission of 10% of sales. Michael estimates Cary will spend 50% of the workday focusing on marketing and sales, and the remaining 50% will be spent on administrative duties. Michael realizes that may have difficulty finding a person skilled in computer graphics to generate the designs to be printed on the shirts. Jayne recently hired a graphics designer in that position for Shirts and More at a rate of $500 per month plus $0.10 for each shirt printed. Michael believes he ran find a ton Ral C.nllene raranhire decirn plus $0.10 for each shirt printed. Michael believes he can find a top Rural College graphics design student to work for the same rate Jayne is paying her designer. Michael was fortunate to find a commercial building for rent near the college in the downtown area. The landlord requires a one-year lease. Although the monthly rent of $1,000 is more than Michael had anticipated paying, the building is nice, has adequate parking, and there is room for expansion. Michael anticipates that 75% of the building will be used in the silk-screen process and 25% will be used for sales and administration. Michael's friends have encouraged him to advertise weekly in the Rural College student newspaper. Upon inquiring, Michael found that a 3 3 ad would cost $25 per week. Michael also plans to run a weekly ad in the local newspaper that will cost him $75 per week. Michael's goal is to sell a large number of quality shirts at a reasonable price. He estimates the selling price of each customized shirt to be $16. Jayne has suggested that he should ask bulk order customers to pay for 70% of their purchases in the quarter purchased and pay the additional 30% in the following quarter. After talking with the insurance agent and the property valuation administrator in his municipality, Michael estimates that the property taxes and insurance on the machinery will cost $2,240 annually; property tax and insurance on display furniture and cash register will total $380 annually. Jayne reminded Michael that maintenance of the machines is required for the silk-screen process. In addition, Michael realizes that he must consider the cost of utilities to run the shop. The building Michael wants to rent is roughly the same size as the building occupied by Shirts and addition, Michael realizes that he must consider the cost of utilities to run the shop. The building Michael wants to rent is roughly the same size as the building occupied by Shirts and More. In addition, Shirts and More sells approximately the same number of shirts Michael plans to sell in his store. Therefore, Michael is confident that the maintenance and utility costs for his shop will be comparable to the maintenance and utility costs for Shirts and More, which are as follows within the relevant range of zero to 8,000 shirts per month. January: 2000 shirts sold. Maintenance costs: $1,716. Utility costs: $1,100 February: 2110 shirts sold. Maintenance costs: $1,720. Utility costs: $1,158 March: 2630 shirts sold. Maintenance costs: $1,740. Utility costs: $1,171 April: 2630 shirts sold. Maintenance costs: \$1,740. Utility costs: $1,198 May: 5000 shirts sold. Maintenance costs: $1,758. Utility costs: $1,268 June: 5000 shirts sold. Maintenance costs: $1,758. Utility costs: $1,268 July: 3920 shirts sold. Maintenance costs: \$1,825. Utility costs: $1,205 August: 2080 shirts sold. Maintenance costs: $1,780. Utility costs: $1,117 September: 8000 shirts sold. Maintenance costs: $1,914. Utility costs: $1,400 October: 6810 shirts sold. Maintenance costs: $1,860. Utility costs: $1,362 November: 6000 shirts sold. Maintenance costs: $1,855. Utility costs: $1,347 December: 3000 shirts sold. Maintenance costs: $1,749. Utility costs: $1,193 April: 2630 shirts sold. Maintenance costs: $1,740. Utility costs: \$1,198 May: 5000 shirts sold. Maintenance costs: $1,758. Utility costs: \$1,268 June: 5000 shirts sold. Maintenance costs: $1,758. Utility costs: $1,268 July: 3920 shirts sold. Maintenance costs: $1,825. Utility costs: $1,205 August: 2080 shirts sold. Maintenance costs: $1,780. Utility costs: $1,117 September: 8000 shirts sold. Maintenance costs: $1,914. Utility costs: $1,400 October: 6810 shirts sold. Maintenance costs: $1,860. Utility costs: $1,362 November: 6000 shirts sold. Maintenance costs: \$1,855. Utility costs: $1,347 December: 3000 shirts sold. Maintenance costs: $1,749. Utility costs: $1,193 Michael estimates the number of shirts to be sold in the first five quarters, beginning at the start of the new year, to be: First quarter, year 1: 8,000 Second quarter, year 1: 10,000 Third quarter, year 1: 20,000 Fourth quarter, year 1: 12,000 First quarter, year 2: 18,000 Michael decides to establish his company as a regular or C-corporation. He will invest $10,000 of his personal savings in the company. Seeing how determined his son was to become an entrepreneur, Michael's father offered to co-sign a note for an amount up to $20,000 to help Michael open his shirt shop, Screenshot Tops, Inc. However, when Michael and his father approached the loan officer at First Guarantee Bank, the loan officer asked Michael to produce the following budgets for 2022 . - Sales budget $1,855. Utility costs: $1,347 December: 3000 shirts sold. Maintenance costs: $1,749. Utility costs: $1,193 Michael estimates the number of shirts to be sold in the first five quarters, beginning at the start of the new year, to be: First quarter, year 1: 8,000 Second quarter, year 1: 10,000 Third quarter, year 1: 20,000 Fourth quarter, year 1: 12,000 First quarter, year 2: 18,000 Michael decides to establish his company as a regular or C-corporation. He will invest $10,000 of his personal savings in the company. Seeing how determined his son was to become an entrepreneur, Michael's father offered to co-sign a note for an amount up to $20,000 to help Michael open his shirt shop, Screenshot Tops, Inc. However, when Michael and his father approached the loan officer at First Guarantee Bank, the loan officer asked Michael to produce the following budgets for 2022 . - Sales budget - Schedule of expected collections from customers for shirt purchases budget - Schedule of expected payments for purchases - Silk-screen labor budget - Selling and administrative expenses budget - Silk-screen overhead expenses budget - Budgeted income statement - Cash budget - Budgeted balance sheet The loan officer advised Michael that the interest rate on a 12-month loan would be 8%. Michael expects the loan to be taken out as of January 1 when he purchases the equipment. Michael has estimated that his income tax rate will be 20%. He expects to pay the total tax due when the returns are filed in 2023. Quarter Shirts to be silk-screened Direct materials per unit Total shirts needed for production Plus: Desired ending direct materials (shirts) Total shirts required Less: Beginning direct materials (shirts) Direct materials purchases Cost per shirt Total cost of shirt purchases The Business Situation Screenshot Tops, Inc. After graduating with a degree in business from Rural College in Campus Town, USA, Michael Woods realized that he wanted to remain in Campus Town and start building a life for himself. After a few unsuccessful attempts at getting a job in his chosen discipline, Michael decided to start his own business. Thinking about his business venture, Michael determined that he had four criteria that were most important to him: 1. He wanted to do something that he would enjoy. 2. He wanted a business that would give back to the community. 3. He wanted a business that could grow and be more successful every year. 4. Realizing that he was going to have to work very hard, Michael wanted a business that would generate a minimum net income of at least $25,000 annually. A bit more about Michael: he was president of his fraternity and served as an officer in several other student organizations and clubs. During these experiences, he realized that there was no place in Campus Town to have custom shirts made using a silk-screen process. When student organizations wanted shirts for their members to wear or to sell for fundraising on campus, the officers had to make a trip to Big City, over 100 miles away, and visit "Shirts and More." Michael grew up in Big City and worked as a parttime employee at Shirts and More while he was in high school. Back then, he envisioned owning such a shop someday. Michael realized that a shop in Campus Town had the potential to meet all four of his criteria. He set up an appointment with Jayne Stoll, the owner of Shirts and More, to obtain information useful in getting his shop started. Michael grew up in Big City and worked as a parttime employee at Shirts and More while he was in high school. Back then, he envisioned owning such a shop someday. Michael realized that a shop in Campus Town had the potential to meet all four of his criteria. He set up an appointment with Jayne Stoll, the owner of Shirts and More, to obtain information useful in getting his shop started. Because Jayne liked Michael and was intrigued by his enterprising spirit, she was happy to answer Michael's questions and help him. Jayne provided information concerning the equipment Michael would need for his business and its average useful life. Fortunately for Michael, Jayne knows of a competitor who is retiring at the end of the year and would like to sell his equipment. Michael can purchase the equipment at the beginning of 2022 , and the retiring owner is willing to give him terms of 50% due upon purchase and 50% due at the end of the quarter following the purchase. Michael decided to purchase the following equipment as of January 1. Hand-operated press that applies ink to the shirt - Cost: \$7,500. Useful Life: 5 years Light-exposure table- Cost: \$1350. Useful Life: 10 years Dryer conveyor belt that makes ink dry on the shirts: Cost: 2,500 Useful life 10 years Computer with graphics software and color printer: Cost: 3,500 Useful life is 4 years Display furniture: Cost: 2,000 . Useful life is 10 years Used cash register: Cost: 500 Useful life is 5 years Michael has decided to use a shirt supplier recommended by Jayne. He learned that a gross1 of good-quality shirts to be silk-screened would cost $1,440. Jayne has encouraged Michael to ask the shirt supplier for terms of 40% of a quarter's purchases to be paid in the quarter of purchase, with the remaining 60% of the quarter's purchases to be paid in the quarter following the purchase as this was routine in the industry. Michael also learned from talking with Jayne that the ink used in the silk-screen process costs approximately $0.75 per shirt on average. Knowing that the silk-screen process is somewhat labor-intensive, Michael plans to hire six college students to help with the process. Each one will work an average of 20 hours per week for 50 weeks during the year. Michael estimates total annual wages for the workers at the state's current minimum wage to be $72,000 in total. In addition, Michael will need one person to take orders, bill customers, and operate the cash register. Cary Smith, who currently works in the Student Development department at Rural College, has approached Michael about a job in sales. Cary knows the officers of all the student organizations on campus. In addition, she is very active in the community and may be able to expand the business' reach. Michael thinks Cary can bring in a lot of business. In addition, she also has the administrative skills needed for the position. Because of her contacts, Michael is willing to pay Cary $1,200 per month plus a commission of 10% of sales. Michael estimates Cary will spend 50% of the workday focusing on marketing and sales, and the remaining 50% will be spent on administrative duties. Michael realizes that may have difficulty finding a person skilled in computer graphics to generate the designs to be printed on the shirts. Jayne recently hired a graphics designer in that position for Shirts and More at a rate of $500 per month plus $0.10 for each shirt printed. Michael believes he ran find a ton Ral C.nllene raranhire decirn plus $0.10 for each shirt printed. Michael believes he can find a top Rural College graphics design student to work for the same rate Jayne is paying her designer. Michael was fortunate to find a commercial building for rent near the college in the downtown area. The landlord requires a one-year lease. Although the monthly rent of $1,000 is more than Michael had anticipated paying, the building is nice, has adequate parking, and there is room for expansion. Michael anticipates that 75% of the building will be used in the silk-screen process and 25% will be used for sales and administration. Michael's friends have encouraged him to advertise weekly in the Rural College student newspaper. Upon inquiring, Michael found that a 3 3 ad would cost $25 per week. Michael also plans to run a weekly ad in the local newspaper that will cost him $75 per week. Michael's goal is to sell a large number of quality shirts at a reasonable price. He estimates the selling price of each customized shirt to be $16. Jayne has suggested that he should ask bulk order customers to pay for 70% of their purchases in the quarter purchased and pay the additional 30% in the following quarter. After talking with the insurance agent and the property valuation administrator in his municipality, Michael estimates that the property taxes and insurance on the machinery will cost $2,240 annually; property tax and insurance on display furniture and cash register will total $380 annually. Jayne reminded Michael that maintenance of the machines is required for the silk-screen process. In addition, Michael realizes that he must consider the cost of utilities to run the shop. The building Michael wants to rent is roughly the same size as the building occupied by Shirts and addition, Michael realizes that he must consider the cost of utilities to run the shop. The building Michael wants to rent is roughly the same size as the building occupied by Shirts and More. In addition, Shirts and More sells approximately the same number of shirts Michael plans to sell in his store. Therefore, Michael is confident that the maintenance and utility costs for his shop will be comparable to the maintenance and utility costs for Shirts and More, which are as follows within the relevant range of zero to 8,000 shirts per month. January: 2000 shirts sold. Maintenance costs: $1,716. Utility costs: $1,100 February: 2110 shirts sold. Maintenance costs: $1,720. Utility costs: $1,158 March: 2630 shirts sold. Maintenance costs: $1,740. Utility costs: $1,171 April: 2630 shirts sold. Maintenance costs: \$1,740. Utility costs: $1,198 May: 5000 shirts sold. Maintenance costs: $1,758. Utility costs: $1,268 June: 5000 shirts sold. Maintenance costs: $1,758. Utility costs: $1,268 July: 3920 shirts sold. Maintenance costs: \$1,825. Utility costs: $1,205 August: 2080 shirts sold. Maintenance costs: $1,780. Utility costs: $1,117 September: 8000 shirts sold. Maintenance costs: $1,914. Utility costs: $1,400 October: 6810 shirts sold. Maintenance costs: $1,860. Utility costs: $1,362 November: 6000 shirts sold. Maintenance costs: $1,855. Utility costs: $1,347 December: 3000 shirts sold. Maintenance costs: $1,749. Utility costs: $1,193 April: 2630 shirts sold. Maintenance costs: $1,740. Utility costs: \$1,198 May: 5000 shirts sold. Maintenance costs: $1,758. Utility costs: \$1,268 June: 5000 shirts sold. Maintenance costs: $1,758. Utility costs: $1,268 July: 3920 shirts sold. Maintenance costs: $1,825. Utility costs: $1,205 August: 2080 shirts sold. Maintenance costs: $1,780. Utility costs: $1,117 September: 8000 shirts sold. Maintenance costs: $1,914. Utility costs: $1,400 October: 6810 shirts sold. Maintenance costs: $1,860. Utility costs: $1,362 November: 6000 shirts sold. Maintenance costs: \$1,855. Utility costs: $1,347 December: 3000 shirts sold. Maintenance costs: $1,749. Utility costs: $1,193 Michael estimates the number of shirts to be sold in the first five quarters, beginning at the start of the new year, to be: First quarter, year 1: 8,000 Second quarter, year 1: 10,000 Third quarter, year 1: 20,000 Fourth quarter, year 1: 12,000 First quarter, year 2: 18,000 Michael decides to establish his company as a regular or C-corporation. He will invest $10,000 of his personal savings in the company. Seeing how determined his son was to become an entrepreneur, Michael's father offered to co-sign a note for an amount up to $20,000 to help Michael open his shirt shop, Screenshot Tops, Inc. However, when Michael and his father approached the loan officer at First Guarantee Bank, the loan officer asked Michael to produce the following budgets for 2022 . - Sales budget $1,855. Utility costs: $1,347 December: 3000 shirts sold. Maintenance costs: $1,749. Utility costs: $1,193 Michael estimates the number of shirts to be sold in the first five quarters, beginning at the start of the new year, to be: First quarter, year 1: 8,000 Second quarter, year 1: 10,000 Third quarter, year 1: 20,000 Fourth quarter, year 1: 12,000 First quarter, year 2: 18,000 Michael decides to establish his company as a regular or C-corporation. He will invest $10,000 of his personal savings in the company. Seeing how determined his son was to become an entrepreneur, Michael's father offered to co-sign a note for an amount up to $20,000 to help Michael open his shirt shop, Screenshot Tops, Inc. However, when Michael and his father approached the loan officer at First Guarantee Bank, the loan officer asked Michael to produce the following budgets for 2022 . - Sales budget - Schedule of expected collections from customers for shirt purchases budget - Schedule of expected payments for purchases - Silk-screen labor budget - Selling and administrative expenses budget - Silk-screen overhead expenses budget - Budgeted income statement - Cash budget - Budgeted balance sheet The loan officer advised Michael that the interest rate on a 12-month loan would be 8%. Michael expects the loan to be taken out as of January 1 when he purchases the equipment. Michael has estimated that his income tax rate will be 20%. He expects to pay the total tax due when the returns are filed in 2023. Quarter Shirts to be silk-screened Direct materials per unit Total shirts needed for production Plus: Desired ending direct materials (shirts) Total shirts required Less: Beginning direct materials (shirts) Direct materials purchases Cost per shirt Total cost of shirt purchases