Following information relates to Acco Co. Complete #1-5.
| 1. | Monthly sales budgets 2.
| Monthly merchandise purchases budgets. | | | 3. Monthly selling expense budgets. | 4. | Monthly general and administrative expense budgets. | 5. | Monthly capital expenditures budgets. | | | | | | |
To prepare a master budget for January, February, and March of 2014, management gathers the following information. a. Dimsdale Sports' single product is purchased for $20 per unit and resold for $53 per unit. The expected inventory level of 4,750 units on December 31, 2013, is more than management's desired level for 2014, which is 20% of the next month's expected sales (in units). Expected sales are: January, 7,000 units; February, 8,700 units; March, 11,000 units; and April, 11,000 units. b. Cash sales and credit sales represent 30% and 70%, respectively, of total sales. Of the credit sales, 63% is collected in the first month after the month of sale and 37% in the second month after the month of sale For the December 31, 2013, accounts receivable balance, $125,000 is collected in January and the remaining $395,000 is collected in February. C. Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2013, accounts payable balance, $75,000 is paid in January and the remaining $295,000 is paid in February $84,000 per year month and is paid in cash. d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are e. General and administrative salaries are $132,000 per year. Maintenance expense equals $2,000 per f. Equipment reported in the December 31, 2013, balance sheet was purchased in January 2013. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $35,000; February, $94,000; and March, $29,500. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full month's depreciation is taken for the month in which equipment is purchased. g. The company plans to acquire land at the end of March at a cost of $140,000, which will be paid with cash on the last day of the month. h. Dimsdale Sports has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $54,460 in each month. i. The income tax rate for the company is 37%. Income taxes on the first quarter's income will not be paid until April 15. Required: Prepare a master budget for each of the first three months of 2014; include the following component budgets
