Chapter 9 Homework Problem Rowley's Office Supplies, 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 of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances: a) Credits Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Capital stock Retained earnings Debits $48,000 224,000 60,000 370,000 $93,000 500,000 109,000 $702,000$702,000 b) Actual sales for December and budgeted sales for the next four months are as follows: December (actual) $280,000 $400,000 $600,000 $300,000 Janua Februa March April $200,000 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 The company's gross profit is 40% of sales. (in other words, cost of goods sold is 60% of sales) sales 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. Each month's ending inventory should equal 25% of the following month's cost of goods sold One-half of a month's inventory purchases is paid for in the month of purchase; the other halfis paid in the following month. During February, the company will purchase a new copy machine for their own use (not for resale) for $1,700 cash. During March other equipment will be purchased for cash at a cost of $84,500 During January, the company will declare and pay $45,000 in cash dividends. Management wants to maintain a minimum cash balance of $30,000. The company has an c) d) e) f) 8) h) i) j) agreement with a local bank that allows the company to borrow in increments of $1,000 at the 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. beginning of each month. The interest rate on these loans is 1% per month and for simplicity we