budgeted income statement

BUDGETS COMPREHENSIVE PROBLEM Scenario: Oriental Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the Master Budget for the first quarter: . As a December 31, (the end of the prior quarter) the company's general ledger showed the following account balances: Debit Credit Cash $48.000 Accounts receivable 224,000 Inventory 60,000 Bunkings and equipment set 370,000 Accounts payable $93.00 Capital stock SO, Retained earnings 109.000 b. Actual sales for December and budgeted sales for the next four (4) months are as follows: December actual 280,000 January 400,000 February 600,000 March 300,000 Ait c. Sales are 30% for Cash and 70% on credit All payments on credit sales are collected in the month following salc. The account receivable at December 31 are a result of December credit sales. d. The company's gross margin is 45% of sales. In other words, cost of goods sold is 55% of sales e. Monthly expenses are budgeted as follows: Salaries and wages, S 29.000 per month Advertising, 75,000 per month Shipping, 6% of sales Other expenses, 4% of sales Depreciation, including depreciation on new assets acquired during the quarter, will be $46,000 for the quarter. f. Each month's ending inventory should equal 30% of the following month's cost of goods sold g. 60% of a month's inventory purchases is paid for in the month of purchase: the other part is paid in the following month. h. During February, the company will purchase a new cost machine for $2,000 cash. During march, other equipment will be purchase for cash at a cost of $85,000 i. During January, the company will declare and pay $47,000 in cash dividends. j. Management wants to maintain a minimum cash balance of $32,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter