GRILTON TIRE COMPANY

Balance Sheet

December 31, 2019

Assets

Current Assets:

Cash$ 39,000

Accounts Receivable40,000

Raw Materials Inventory2,400

Finished Goods Inventory8,700

Total Current Assets$ 90,100

Property, Plant and Equipment:

Equipment177,000

Less: Accumulated Depreciation(42,000)135,000

Total Assets$225,100

Liabilities

Current Liabilities:

Accounts Payable$ 8,000

Stockholder's Equity

Common Stock, no par$ 130,000

Retained Earnings87,100

Total Stockholder's Equity217,100

Total Liabilities and Stockholder's Equity$225,100

Other data for Grilton Tire Company:

Budgeted Sales are 1,500 for the first quarter and expected to increase by 200 tires per quarter. Cash Sales are expected to be 30% of total sales, with the remaining 70% of sales on account.

Finished Goods Inventory on December 31, 2019 consists of 300 tires at $29 each.

Desired ending Finished Goods Inventory is 40% of the next quarter's sales; first quarter sales for 2020 are expected to be 2,300 tires and second quarter sales for 2020 are expected to be 2,500.FIFO inventory costing method is used.

Direct Materials cost is $8 per tire.

Desired ending Raw Materials Inventory is 30% of the next quarter's direct materials needed for production.

Each tire requires 0.40 hours of direct labor; direct labor costs average $16 per hour.

Variable manufacturing overhead is $2 per tire produced.

Fixed manufacturing overhead includes $4,500 per quarter in depreciation and $26,780 per quarter for other costs, such as utilities, insurance, and property taxes.

Fixed selling and administrative expenses include $8,000 per quarter for salaries; $1,800 per quarter for rent; $1,200 per quarter for insurance; and $500 per quarter for depreciation.

Variable selling and administrative expenses include supplies at 2% of sales.

Capital expenditures include $45,000 for new manufacturing equipment, to be purchased and paid in the first quarter.

Cash receipts for sales on account are 60% in the quarter of sale and 40% in the quarter following the sale. The December 31, 2019 Accounts Receivable ($40,000) is received in the first quarter of 2020.

Direct materials purchases are paid 70% in the quarter purchased and 30% in the following quarter. The December 31, 2019 Accounts Payable ($8,000) is paid in the first quarter of 2020.

Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.

Income tax expense is projected at $3,500 per quarter and is paid in the quarter incurred.

Grilton desires to maintain a minimum cash balance of $35,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter; principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000; interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. Interest must be paid at the beginning of each quarter.

REQUIREMENTS:

Prepare the sales budget in units and dollars for each quarter and in total for the year 2020.

Prepare the schedule of expected cash collections for each quarter and in total for the year 2020.

Prepare the production budget for each quarter and in total for the year 2020.

Prepare the direct materials budget for each quarter and in total for the year 2020.

Prepare the schedule of expected cash disbursements for purchases ofmaterials for each quarter and in total of the year 2020.

Prepare the budgeted Schedule of Cost of Goods Manufactured for the year of 2020.

Prepare the budgeted Income Statement for the year of 2020

Prepare the cash budget for the year of 2020.