Below is the question
Near the end of 2019, the management of Dimsdale Sports (20., a merchandising company, prepared the following estimated balance sheet for December 3'1, 2019. DIHSMLE SPORTS (WANT Estimated Balance Sheet December 31, 2819 Assets Cash 5 36,580 Accounts receivable 528,369 Inventory 113,669 Total current assets 5 556,580 Equipment 543,669 Less: Accumulated depreciation 5?, 569 Equipment, net 472,580 Total assets 5 111395399 Liabilities and Equity Accounts payable 5 358,339 Bank loan payable 12,880 Taxes payable (due 3f15f2626) 91,669 Total liabilities 5 453,380 Common stock 471,669 Retained earnings 215,669 Total stockholders' equityr 586,880 Total liabilities and equityr 5 111395399 To prepare a master budget for January, February, and March of 2020, management gathers the following information. a. The company's single product is purchased for $20 per unit and resold for $5? per unit. The expected inventory level of 5,500 units on December 31, 2019, is more than management's desired level, which is 20% ofthe next month's expected sales {in units]. Expected sales are January, 7,000 units; February, 9,500 units; March, 11,500 units; and April, 10,000 units. 6-. Cash sales and credit sales represent 20% and 80%, respectively, of total sales. Of the credit sales, 59% is collected in the first month afterthe month ofsale and 41% in the second month after the month of sale. For the December 31, 2019, accounts receivable balance, $125,000 is collected in January 2020 and the remaining $395,000 is collected in February 2020. 1:. Merchandise purchases are paid for as follows: 20% in the rst month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2019, accounts payable balance, $65,000 is paid in January 2020 and the remaining $285,000 is paid in February 2020. d. Sales commissions equal to 20% of sales are paid each month. Sales salaries {excluding commissions} are $96,000 per year. is. General and administrative salaries are $144,000 per year. Maintenance expense equals $2,000 per month and is paid in cash. f. Equipment reported in the December 31, 2019, balance sheet was purchased in January 2019. It is being depreciated over eight years under the straightline method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $36,000; February, $96,000; and March, $21,600. 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. 9. The company plans to buy land at the end of March at a cost of $155,000, which will be paid with cash on the last day of the month. h. "he company has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and nterest is paid at each monthend 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$21,000 at the end of each month. i. "he income tax rate for the company is 41%. Income taxes on the first quarter's income will not be paid until April 15. Required: Prepare a master budget for each ofthe rst three months of 2020; include the following component budgets. 1. Monthly sales budgets. 2. Monthly merchandise purchases budgets. 3. Monthly selling expense budgets. 4. Monthly general and administrative expense budgets. 5. Monthly capital expenditures budgets. 6. Monthly cash budgets. 7. Budgeted income statement for the entire rst quarter (not for each month}. 8. Budgeted balance sheet as of March 31, 2020. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 6 Calc Cash Bud Required 7 Required 8 Monthly merchandise purchases budgets. DIMSDALE SPORTS CO. Merchandise Purchases Budget January, February, and March 2020 January February March Next month's budgeted sales (units) 9.500 11,500 10,000 Ratio of inventory to future sales 20% 20% 20% Budgeted ending inventory (units) Budgeted units sales for month Required units of available merchandise Beginning inventory (units) Units to be purchased
