Completing a Master Budget [L02] The following data relate to the operations of Gaudreau Company, which distributes consumer goods: Current assets as of December 31: Cash............................ $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) ...... $60,000 January.............. $70,000 February.............. $80,000 March................ $85,000 April................. $55,000 c. Sales are 40% for cash and 60% 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 $8,000 in February. h. Management would like to maintain a minimum cash balance of $6,000 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 total 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 (also in increments of $1,000) plus accumulated interest at the end of the quarter. Required: Using the data above: 1. Complete the following schedule: Schedule of Expected Cash Collections January February March Quarter Cash sales $28,000 Credit sales 36,000 Total collections $64,000 2. Complete the following: Merchandise Purchasing Budget January February March Quarter Budgeted cost of goods sold $49,000* Add desired ending inventory 11,200** Total needs $60,200 Less beginning inventory 9,800 Required purchases $50,400 * $70,000 sales X 70% - $49,000. ** $80,000 X 70% X 20% - $11,200. 3. Schedule of Expected Cash Disbursements - Merchandise Purchases January February March Quarter December purchases $32,550* $32,550 January purchases 12,600 $37,800 50,400 February purchases March purchases Total disbursements $45,150 * Beginning balance of the accounts payable 4. Complete the following schedule: Schedule of Expected Cash Disbursements Selling and Administrative Expenses January February March Quarter Commissions................. $12,000 Rent ......................... 1,800 Other expenses ................ 5,600 Total disbursements ............ $19,400 5. Complete the following cash budget: January February March Quarter Cash balance, beginning ......... $ 6,000 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 ........ 67,550 Excess (deficiency) of cash ........$ 2,450 Financing Etc. 6. Prepare an absorption costing income statement, similar to the one shown in Schedule 9, for the quarter ended March 31. 7. Prepare a balance sheet as of March 31