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ALL GIVEN INFO LISTED IN FIRST PICTURE. The following information applies to the questions displayed below. ] We really need to get this new

ALL GIVEN INFO LISTED IN FIRST PICTURE.
The following information applies to the questions displayed below.
]
"
We really need to get this new material
-
handling equipment in operation just after the new year begins. I
hope we can finance it largely with cash and marketable securities
,
but if necessary we can get a short
-
term
loan down at MetroBank." This statement by Beth Davies
-
Lowry, president of Intercoastal Electronics
Company, concluded a meeting she had called with the firm's top management. Intercoastal is a small,
rapidly growing wholesaler of consumer electronic products. The firm's main product lines are small kitchen
appliances and power tools. Marcia Wilcox, Intercoastal's General Manager of Marketing, has recently
completed a sales forecast. She believes the company's sales during the first quarter of
20
\times
1
will increase by
10
percent each month over the previous month's sales. Then Wilcox expects sales to remain constant for
several months. Intercoastal's projected balance sheet as of December
31
,
20
x
0
,
is as follows:
Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of
20
\times
1
.
In the
process, the following information has been accumulated:
Projected sales for December of
20
\times
0
are $
500
,
000
.
Credit sales typically are
60
percent of total sales.
Intercoastal's credit experience indicates that
30
percent of the credit sales are collected during the
month of sale, and the remainder are collected during the following month.
Intercoastal's cost of goods sold generally runs at
70
percent of sales. Inventory is purchased on account,
and
50
percent of each month's purchases are paid during the month of purchase. The remainder is paid
during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to
have inventory at the end of each month equal to half of the next month's projected cost of goods sold.
Hanson has estimated that Intercoastal's other monthly expenses will be as follows:
In addition, sales commissions run at the rate of
1
percent of sales.
Intercoastal's president, Davies
-
Lowry, has indicated that the firm should invest $
125
,
000
in an automated
inventory
-
handling system to control the movement of inventory in the firm's warehouse just after the new
year begins. These equipment purchases will be financed primarily from the firm's cash and marketable
securities
.
However, Davies
-
Lowry believes that Intercoastal needs to keep a minimum cash balance of
$
25
,
000
.
If necessary, the remainder of the equipment purchases will be financed using short
-
term credit
from a local bank. The minimum period for such a loan is three months. Hanson believes short
-
term
interest rates will be
10
percent per year at the time of the equipment purchases. If a loan is necessary,
Davies
-
Lowry has decided it should be paid off by the end of the first quarter if possible.
Intercoastal's board of directors has indicated an intention to declare and pay dividends of $
50
,
000
on
the last day of each quarter.
The interest on any short
-
term borrowing will be paid when the loan is repaid. Interest on Intercoastal's
bonds is paid semiannually on January
31
and July
31
for the preceding six
-
month period.
Property taxes are paid semiannually on February
28
and August
31
for the preceding six
-
month period.
Required:
Prepare Intercoastal Electronics Company's master budget for the first quarter of
20
\times
1
by completing the
following schedules and statements.
PLEASE PREPARE THE FOLLOWING:
1)
Sales budget:
2)
Cash receipts budget:
3)
Purchases Budget
4)
Cash disbursements budget:
5)
Complete the first three lines of the summary cash budget. Then do the analysis of short
-
term financing needs in requirement
(6)
.
Then finish requirement
(5)
.
6)
Calculation of required short
-
term borrowing.
7)
Prepare Intercoastal Electronics
budgeted income statement for the first quarter of
20
x
1
.
(
Ignore income taxes.
)
8)
Prepare Intercoastal Electronics
budgeted statement of retained earnings for the first quarter of
20
x
1
.
9)
Prepare Intercoastal Electronics
budgeted balance sheet as of March
31
,
20
x
1
.
(
Hint: On March
31
,
20
x
1
,
Bond Interest Payable is $
3750
and Property Taxes Payable is $
600
.
)
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