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imsdale Sports, a merchandising company, reports the following balance sheet at December 31. DIMSDALE SPORTS COMPANY Balance Sheet December 31 Assets Cash $ 20,500 Accounts
imsdale 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 | 165,000 | |
Equipment | $ 624,000 | |
Less: Accumulated depreciation | 78,000 | |
Equipment, net | 546,000 | |
Total assets | $ 1,251,500 | |
Liabilities and Equity | ||
Liabilities | ||
Accounts payable | $ 350,000 | |
Loan payable | 12,000 | |
Taxes payable (due March 15) | 89,000 | $ 451,000 |
Equity | ||
Common stock | $ 470,500 | |
Retained earnings | 330,000 | |
Total stockholders equity | 800,500 | |
Total liabilities and equity | $ 1,251,500 |
To prepare a master budget for January, February, and March, use the following information.
- The companys single product is purchased for $30 per unit and resold for $59 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, 7,000 units; February, 8,750 units; March, 11,000 units; and April, 11,000 units. All sales are on credit.
- Cash receipts from sales are budgeted as follows: January, $269,550; February, $734,074; March, $535,197.
- Cash payments for merchandise purchases are budgeted as follows: January, $65,000; February, $304,500; March, $133,200.
- Sales commissions equal to 20% of sales dollars are paid each month. Sales salaries (excluding commissions) are $7,500 per month.
- General and administrative salaries are $12,000 per month. Maintenance expense equals $1,800 per month and is paid in cash.
- New equipment purchases are budgeted as follows: January, $40,800; February, $96,000; and March, $24,000. Budgeted depreciation expense is January, $ 6,925; February, $7,925; and March, $8,175.
- The company budgets a land purchase at the end of March at a cost of $165,000, 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 41%. Income taxes on the first quarters income will not be paid until April 15.
DIMSDALE SPORTS Merchandise Purchases Budget January February March Calculation of Desired ending inventory Next period budgeted sales units Ratio of inventory to future sales Total required units Units to be purchased Cost per unit Cost of merchandise purchases Budgeted Income Statement For Three Months Ended March 31 Selling, general and administrative expenses Total operating expenses 0 0 0 Assets Total current assets 0 Equipment, Net Total assets Liabilities and Equity Liabilities Total liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity
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