Budgeted Financial Statements Month of Sale Month Following Sale Uncollectible 40% 58% 2% Sales in December were 20,000 units. Purchases of merchandise are made each month on credit, the budgeted purchase price of Inventory is $18 per unit. Target Ending Inventory and payments include: Target Ending Inventory 20% of next month's Sales December Purchases 21,600 units Payment of Purchases Month of Sale 60% Month Following Sale 40% The budget for Operating expenses includes the following: Variable Operating expenses Fixed Operating expenses $4 per unit sold $40,000 per month All Operating expenses are assumed to be paid in cash for budgeting purposes. Other information includes: Minimum Cash balance Interest rate on Short-Term borrowing Purchase of Equinment January 1 $20,000 10% $80.000 Minimum Cash balance Interest rate on Short-Term borrowing Purchase of Equipment, January 1 Useful Life of Equipment Repayment of Long-Term Note Payable Depreciation Method $20,000 10% $80,000 8 years March 31 Straight-Line The minimum cash balance each month is $20,000, short-term borrowing on a line of credit from the bank is available at a monthly interest rate of 10%. All borrowing occurs at the beginning of the month, repayments are made at the end of each quarter if sufficient amounts of cash are available. Equipment costing $80,000 with a useful life of 8 years is planning to be purchased on January 1st. The Straight-Line depreciation method is used. If sufficient funds are available, the Long-Term Note Payable with interest will be repaid at the end of March. Required: Prepare the following budgets for January, February, March and the 1st quarter. 1. Sales Budget in units and dollars. 2. Purchases Budget in units and in dollars. 3. Schedule of Cash Collections from Sales, and Cash Payments for Purchases. 4. Operating Expense Budget. 5. Cash Budget. 6. Budgeted Income Statement. 7. Budgeted Balance Sheet.