Cash.. PROBLEM 1 Completing a Master Budget [L04 The following data relate to the operations of Lim Corporation, a wholesale distributor of consumer goods: Current assets as of December 31: $6,000 Accounts receivable, $36,000 Inventory.... $9,800 Buildings and equipment, net $110.885 Accounts payable $32,550 Common shares... $100,000 Retained earnings $30,135 a. The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales) b. Actual and budgeted sales data are as follows: December (actual) $80,000 January $70,000 February $80,000 March $85.000 April $55,000 c. Sales are 40% for cash and 80% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales d. Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold e One-quarter of a month's inventory purchases is paid for in the month of purchase: the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory f. Monthly expenses are as follows: commissions. $12,000; rent, $1,800 other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter, g. Equipment will be acquired for cash: $3,000 in January and 58.000 in February h. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of S 1.000 at the beginning of each month, up to a Mailing Review Ito -A- TCaption Emphasis Heading Headingt Haring2 Tom Paragugh the other three-quarters is paid for in the following month. The accounts payable al December 31 are the result of December purchases of inventory f. Monthly expenses are as follows commissions, $12,000, rent, S1,800, other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. 9. Equipment will be acquired for cash $3,000 in January and $8,000 in February h Management would like to maintain a minimum cash balance of $5,000 at the end of each month. 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, up to a I fotal loan balance of $50,000. 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 1. Complete the following schedule Schedule of Expected Cash Collections 0 18C Mostly scer 2234 Hand Insignia 131 - Cempat Mede Word Review View Refers Ming A A A A-2A AD A AaBbc AaBbc Aalbel AA babe Caption in THedegedingt dig? Noma Parah Styr February March Quarter 4. Complete the following cash budget: January Cash balance, boginning 56,000 Add cash collections 64.000 Total cash available 70,000 Less cash disbursements For inventory 45,150 For operating expenses 19.400 For equipment 3.000 Total cash disbursements 67550 Excess (deficiency) of cash $ 2450 Financing Etc I 6. Prepare an absorption costing income statement, similar to the one shown in Chapter 8, for the quarter ended March 31 6. Prepare a balance sheet as of March 31 O * 18C Mostly sunny acer Cash.. PROBLEM 1 Completing a Master Budget [L04 The following data relate to the operations of Lim Corporation, a wholesale distributor of consumer goods: Current assets as of December 31: $6,000 Accounts receivable, $36,000 Inventory.... $9,800 Buildings and equipment, net $110.885 Accounts payable $32,550 Common shares... $100,000 Retained earnings $30,135 a. The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales) b. Actual and budgeted sales data are as follows: December (actual) $80,000 January $70,000 February $80,000 March $85.000 April $55,000 c. Sales are 40% for cash and 80% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales d. Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold e One-quarter of a month's inventory purchases is paid for in the month of purchase: the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory f. Monthly expenses are as follows: commissions. $12,000; rent, $1,800 other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter, g. Equipment will be acquired for cash: $3,000 in January and 58.000 in February h. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of S 1.000 at the beginning of each month, up to a Mailing Review Ito -A- TCaption Emphasis Heading Headingt Haring2 Tom Paragugh the other three-quarters is paid for in the following month. The accounts payable al December 31 are the result of December purchases of inventory f. Monthly expenses are as follows commissions, $12,000, rent, S1,800, other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. 9. Equipment will be acquired for cash $3,000 in January and $8,000 in February h Management would like to maintain a minimum cash balance of $5,000 at the end of each month. 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, up to a I fotal loan balance of $50,000. 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 1. Complete the following schedule Schedule of Expected Cash Collections 0 18C Mostly scer 2234 Hand Insignia 131 - Cempat Mede Word Review View Refers Ming A A A A-2A AD A AaBbc AaBbc Aalbel AA babe Caption in THedegedingt dig? Noma Parah Styr February March Quarter 4. Complete the following cash budget: January Cash balance, boginning 56,000 Add cash collections 64.000 Total cash available 70,000 Less cash disbursements For inventory 45,150 For operating expenses 19.400 For equipment 3.000 Total cash disbursements 67550 Excess (deficiency) of cash $ 2450 Financing Etc I 6. Prepare an absorption costing income statement, similar to the one shown in Chapter 8, for the quarter ended March 31 6. Prepare a balance sheet as of March 31 O * 18C Mostly sunny acer