Mercatt Enterprises is a retail company and is preparing their budget for the coming year, commencing 1 January 20XX. The following information has been assembled.

1.All sales are on credit. Sixty percent of customer accounts are collected in the month of sale, 35 percent in the following month, and 5 percent are considered uncollectable. Management has estimated that of the amount expected to be outstanding from customers at the end of the current year (31 December), only 20 percent will be collected in January with the remainder being uncollectable.

2.Seventy percent of the goods purchased are paid in the month of purchase and the remaining 30 percent is paid in the following month.

3.The following balances are expected on 31 December: Cash $20,000; Accounts receivable $55,000; and Accounts payable $22,000.

4.The company maintains a minimum cash balance of $20,000 at all times, and sometimes needs to borrow to achieve this. Assume that bank financing is available in multiples of $1000 at 8 percent interest per annum. Borrowings take place at the beginning of each month and repayment occurs at the end of the month. Interest is paid at the same time as the principal is repaid and is based on the amount of the principal repaid at that time,

5.Gross purchases/costs average 60 percent of sales.

6. Additional budget data: 31 January 28 February 31 March Sales Revenue $150,000 $180,000 $185.000 Salaries 31,000 24,000 45,000 7. Depreciation is expected to be $1000 per month. All cash expenses are paid for in the month in which they are incurred. 8. GSE plans to pay no dividends to shareholders. 9. Ignore corporations tax