Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Common stock Retained earnings Debits $ 48,000 224,000 60,000 370,000 Credits $ 93,000 500,000 109,000 $ 702,000 $ 702,000 b. Actual sales for December and budgeted sales for the next four mont December (actual) $ 280,000 January $ 400,000 February $ 600,000 March $ 300,000 April $ 200,000 Complete the merchandise purchases budget. Merchandise Purchases Budget January February March Quarter Budgeted cost of goods sold $ 240,000 $360,000 $180,000 $780,000 Add desired ending inventory 90,000+ 45,000 30,000 0 Total needs 330,000 405,000 210,000 780,000 Less beginning inventory 60,000 90,000 45,000 Required purchases $ 270,000 $315,000 $165,000 $780,000 $400,000 sales x 60% cost ratio = $240,000. +$360,000 x 25% = $90,000. For the Quarter Ended March 31 Sales Cost of goods sold: Beginning inventory Purchases Goods available for sale Ending inventory Gross margin Selling and administrative expenses: Salaries and wages Advertising Shipping Depreciation Other expenses Net operating income Interest expense Net income + 0 0 0 0 0 $ 0 Current assets: Cash Accounts receivable Inventory Total current assets Buildings and equipment, net 0 Total assets $ + Liabilities and Stockholders' Equity Current liabilities: Accounts payable Stockholders' equity: Common stock Retained earnings Total liabilities and stockholders' equity 0 EA $ 0 c. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales. d. The company's gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.) e. Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month: advertising, $70,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,000 for the quarter. f. Each month's ending inventory should equal 25% of the following month's cost of goods sold. g. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid in the following month. h. During February, the company will purchase a new copy machine for $1,700 cash. During March, other equipment will be purchase for cash at a cost of $84,500. 1. During January, the company will declare and pay $45,000 in cash dividends. J. Management wants to maintain a minimum cash balance of $30,000. 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. Required: Using the data above, complete the following statements and schedules for the first quarter. 1. Schedule of expected cash collections: 2-a. Merchandise purchases budget: 2-b. Schedule of expected cash disbursements for merchandise purchases: 3. Cash budget: 4. Prepare an absorption costing income statement for the quarter ending March 31. 5 Prenare a halance sheet as of March 31