for part 6 as well.

[The following information applies to the questions displayed below.) Near the end of 2013, the management of Ramsey Clothing Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2013. RAMSEY CLOTHING COMPANY Estimated Balance Sheet December 31, 2013 Assets Cash $36,000 Accounts receivable 520,000 150,000 Inventory 706,000 Total current assets Equipment Less accumulated depreciation $ 544,000 68,000 Equipment, net 476,000 Total assets $1,182,000 $360,000 Liabilities and Equity Accounts payable Bank loan payable Taxes payable (due 3/15/2014) 16,000 91,000 Total liabilities Common stock $ 467,000 470,000 245,000 Retained earnings Total stockholders' equity 715,000 Total liabilities and equity $1,182,000 To prepare a master budget for January February, and March of 2014, management gathers the following information. a. Ramsey Clothing' single product is purchased for $30 per unit and resold for $55 per unit. The expected inventory level of 5,000 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 9,000 units; March, 11,250 units; and April, 10,500 units. b. Cash sales and credit sales represent 20% and 80%, respectively, of total sales. Of the credit sales, 65% is collected in the first month after the month of sale and 35% 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 $285,000 is paid in February. d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $54,000 per year. e. General and administrative salaries are $144,000 per year. Maintenance expense equals $2,000 per month and is paid in cash. 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, $38,000: 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 $145,000, which will be paid with cash in the last day of the month, h. Ramsey Clothing 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 $13,340 in each month. 1. The income tax rate for the company is 35%. 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: 1. Monthly sales budgets. RAMSEY CLOTHING CO. Sales Budget For January, February, and March, 2014 Budgeted Unit Budgeted Budgeted Sales Unit Price Total Dollars January February March Totals for the quarter 2. Monthly merchandise purchases budgets. RAMSEY CLOTHING CO. Merchandise Purchases Budget January, February, and March 2014 January February 9,000 11.250 20% 20% Next month's budgeted sales (units) Ratio of inventory to future sales March 10,500 20% Required units of available merchandise Units to be purchased 3. Monthly selling expense budgets. RAMSEY CLOTHING CO. Selling Expense Budget January, February, and March 2014 January February March Budgeted sales Salos commissions 4. Monthly general and administrative expense budgets. February March January $ 544,000 Equipment - beginning of month Equipment purchases Equipment - end of month RAMSEY CLOTHING CO. General and Administrative Expense Budget January, February, and March 2014 January February March 5. Monthly capital expenditures budgets. RAMSEY CLOTHING CO. Capital Expenditures Budget January, February, and March 2014 January February March Total 6. Monthly cash budgets. RAMSEY CLOTHING CO. Cash Budget January, February, and March 2014 January February March Beginning cash balance Total cash available Cash disbursements: Total cash disbursements Preliminary cash balance Ending cash balance Loan balance January February March Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month 7. Budgeted income statement for the entire first quarter (not for each month). RAMSEY CLOTHING CO. Budgeted Income Statement For Three Months Ended March 31, 2014 8. Budgeted balance sheet as of March 31, 2014. RAMSEY CLOTHING CO. Budgeted Balance Sheet March 31, 2014 Assets Liabilities and Equity Liabilities + Bank loan payable Stockholders' Equity Tani noftro Calculation of cash receipts from cutomne Fy Mark Santina Being proper Toutes Canh Si on te 2014 March 31 You January Coed February 305.000 March Accounts Recently $ 1520,000 125.000 Credits from Ja Fabry March To con free . 3 125 000 $ 6.000 OS To cash recipe from January P March Collections from Calculation of payment for merchandise February March January Desired enormory funda) Bagele sale sunt Torquard Beginning intory () Number of us to be Durchased Coal por un Telescoot of hate March 31 Paid in January February 30,000 $ 75,000 $ 285.000 March 1 ACOURS Pory 1 March January Maron D Tash paid for mechandise 75,000 $ 205,000 ols