firms main product lines are small Kitchen apprances and power tools Marcia Wilcox, intercoastals General Manager of Marketing has recently completed a sales forecast. She beleves the company's sales during the first quarter of 20x1 will Increase by 10 percent each month over the previous month's sales. Then Wilcox expects sales to remain constant for several months. Intercoastal's projected balance sheet as of December 31, 20x0, is as follows: Caith accounts receivable Marketable securities Inventory Buildings and equipment (net of sculated precision) Accounts payable Bond interest payable Property taxes payable Bonds payable 10 din 20x6) Connon stock Retatearin Total lisbilities and stockholders' equity 45.000 300.000 16.000 192.500 600,000 $1.212.500 $ 220,500 13.750 6,000 330.000 500.00 10.250 11.212.500 Jack Hanson, the assistant controller is now preparing a monthly budget for the first quarter of 20x1 in the process, the following information has been accumulated 1 Projected sales for December of 20x0 are $500,000. Credit sales typically are 80 percent of total sales Intercoastar's credit experience indicates that 10 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month 2 Intercoastal's cost of goods sold generally runs at 70 percent of sales Inventory is purchased on account, and 40 percent of each month's purchases are paid during the month of purchase. The remainder is paid during the following month, In order to have adequate stocks of inventory on hand, the firm attempts to have inventory at the end of each month equal to half of the next month's projected cost of goods sold 3. Hanson has estimated that intercoastal's other monthly expenses will be as follows Sales salaries Advertising and proti dninistrative salarie Depreciation Interert on bode Property taxes 135.000 16.000 35.000 30.000 2.750 1.600 In addition, sales commissions run at the rate of 1 percent of sales 4. Intercoastal's president Davies-Lowry has indicated that the firm should invest $125,000 in an automated inventory handling system to control the movement of Inventory in the firm's warehouse just after the new year begins. These equipment purchases will be financed primarily from the firm's cash and marketable securities. However, Davies Lowry believes that intercoastal needs to keep a minimum cash balance of $25,000. if necessary, the remainder of the equipment purchases will be financed using short term credit from a local bank. The minimum period for such a loan is three months Hanson believes short-term interest rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary. Davies-Lowry has decided it should be paid off by the end of the first quarter possible 5. Intercoastal's board of directors has indicated an intention to declare and pay dividends of $50,000 on the last day of each quarter 6. The interest on any short-term borrowing will be paid when the loan is repoid. Interest on Intercoastal's bonds is paid semiannually on January 31 and July 31 for the preceding six-month period 7. Property taxes are paid semiannually on February 28 and August 31 for the preceding six-month period Required: Prepare Intercoastal Electronics Company's master budget for the first quarter of 20xd by completing the following Schedules and statements 9. Prepare Intercoastal Electronics' budgeted balance sheet as of March 31, 20x1 (Hint On March 31, 20x1, Bond Interest Payable is $5,500 and Property Taxes Payable is $1,500.) INTERCOASTAL ELECTRONICS COMPANY Budgeted Balance Sheet March 31, 20x1 Cash Accounts receivable Inventory Buildings and equipment S 0 Total assets Accounts payable Bond interest payable Property taxes payable Bonds payable Common stock Retained earnings $ Totat liabilities and stockholders' equity firms main product lines are small Kitchen apprances and power tools Marcia Wilcox, intercoastals General Manager of Marketing has recently completed a sales forecast. She beleves the company's sales during the first quarter of 20x1 will Increase by 10 percent each month over the previous month's sales. Then Wilcox expects sales to remain constant for several months. Intercoastal's projected balance sheet as of December 31, 20x0, is as follows: Caith accounts receivable Marketable securities Inventory Buildings and equipment (net of sculated precision) Accounts payable Bond interest payable Property taxes payable Bonds payable 10 din 20x6) Connon stock Retatearin Total lisbilities and stockholders' equity 45.000 300.000 16.000 192.500 600,000 $1.212.500 $ 220,500 13.750 6,000 330.000 500.00 10.250 11.212.500 Jack Hanson, the assistant controller is now preparing a monthly budget for the first quarter of 20x1 in the process, the following information has been accumulated 1 Projected sales for December of 20x0 are $500,000. Credit sales typically are 80 percent of total sales Intercoastar's credit experience indicates that 10 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month 2 Intercoastal's cost of goods sold generally runs at 70 percent of sales Inventory is purchased on account, and 40 percent of each month's purchases are paid during the month of purchase. The remainder is paid during the following month, In order to have adequate stocks of inventory on hand, the firm attempts to have inventory at the end of each month equal to half of the next month's projected cost of goods sold 3. Hanson has estimated that intercoastal's other monthly expenses will be as follows Sales salaries Advertising and proti dninistrative salarie Depreciation Interert on bode Property taxes 135.000 16.000 35.000 30.000 2.750 1.600 In addition, sales commissions run at the rate of 1 percent of sales 4. Intercoastal's president Davies-Lowry has indicated that the firm should invest $125,000 in an automated inventory handling system to control the movement of Inventory in the firm's warehouse just after the new year begins. These equipment purchases will be financed primarily from the firm's cash and marketable securities. However, Davies Lowry believes that intercoastal needs to keep a minimum cash balance of $25,000. if necessary, the remainder of the equipment purchases will be financed using short term credit from a local bank. The minimum period for such a loan is three months Hanson believes short-term interest rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary. Davies-Lowry has decided it should be paid off by the end of the first quarter possible 5. Intercoastal's board of directors has indicated an intention to declare and pay dividends of $50,000 on the last day of each quarter 6. The interest on any short-term borrowing will be paid when the loan is repoid. Interest on Intercoastal's bonds is paid semiannually on January 31 and July 31 for the preceding six-month period 7. Property taxes are paid semiannually on February 28 and August 31 for the preceding six-month period Required: Prepare Intercoastal Electronics Company's master budget for the first quarter of 20xd by completing the following Schedules and statements 9. Prepare Intercoastal Electronics' budgeted balance sheet as of March 31, 20x1 (Hint On March 31, 20x1, Bond Interest Payable is $5,500 and Property Taxes Payable is $1,500.) INTERCOASTAL ELECTRONICS COMPANY Budgeted Balance Sheet March 31, 20x1 Cash Accounts receivable Inventory Buildings and equipment S 0 Total assets Accounts payable Bond interest payable Property taxes payable Bonds payable Common stock Retained earnings $ Totat liabilities and stockholders' equity