Dimsdale Sports, a merchandising company, reports the following balance sheet at December 31. DIMSDALE SPORTS COMPANY Balance Sheet December 31 Assets Cash $ 20,500 Accounts receivable 520,000 Inventory 110,000 Equipment $ 600,000 Less: Accumulated depreciation 75,000 Equipment, net 525,000 Total assets $ 1,175,500 Liabilities and Equity Liabilities Accounts payable $ 350,000 Loan payable 13,000 Taxes payable (due March 15) 90,000 $ 453,000 Equity Common stock $ 473,000 Retained earnings 249,500 Total stockholders equity 722,500 Total liabilities and equity $ 1,175,500 To prepare a master budget for January, February, and March, use the following information. The companys single product is purchased for $20 per unit and resold for $57 per unit. The inventory level of 5,500 units on December 31 is more than managements desired level, which is 20% of the next months budgeted sales units. Budgeted sales are January, 6,500 units; February, 8,500 units; March, 10,500 units; and April, 9,500 units. All sales are on credit. Cash receipts from sales are budgeted as follows: January, $236,150; February, $688,180; March, $484,387. Cash payments for merchandise purchases are budgeted as follows: January, $60,000; February, $300,800; March, $78,800. Sales commissions equal to 20% of sales dollars are paid each month. Sales salaries (excluding commissions) are $7,000 per month. General and administrative salaries are $11,000 per month. Maintenance expense equals $1,900 per month and is paid in cash. New equipment purchases are budgeted as follows: January, $33,600; February, $96,000; and March, $24,000. Budgeted depreciation expense is January, $ 6,600; February, $7,600; and March, $7,850. The company budgets a land purchase at the end of March at a cost of $160,000, which will be paid with cash on the last day of the month. The company has an agreement with its bank to obtain additional loans as needed. The interest rate is 1% per month and interest is paid at each month-end based on the beginning-month balance. Partial or full payments on these loans are made on the last day of the month. The company maintains a minimum ending cash balance of $20,500 at the end of each month. The income tax rate for the company is 43%. Income taxes on the first quarters income will not be paid until April 15. Required: Prepare a master budget for the months of January, February, and March that has the following budgets: 1. Sales budgets. 2. Merchandise purchases budgets. 3. Selling expense budgets. 4. General and administrative expense budgets. Hint: Depreciation is included in the general and administrative budget for merchandisers. 5. Capital expenditures budgets. 6. Cash budgets. 7. Budgeted income statement for entire quarter (not monthly) ended March 31. 8. Budgeted balance sheet as of March 31.