Near the end of 2011, the management of Simid Sports Co., a merchandising company, prepared the following estimated statement of financial position for December 31, 2011. SIMID SPORTS COMPANY Estimated Statement of Financial Position December 31, 2011 Assets Cash Inventony Total current assets $ 18,000 262,500 5,000 355,500 33,750 236,250 S591,750 Equipment $270,000 Total assets Liabilities and Equity Accounts payable Bank loan payable Tax payable (due 3/15/2012) 180,000 ,500 45,000 $232,500 Total liabilities Share capital-ordinary Retained earnings 236,250 123,000 Total stockholders' equity 359250 Total liabilities and equity $591,750 To prepare a master budget for January, February, and March of 2012, management gathers the following information. Simid Sports' single product is purchased for $30 per unit and resold for $55 per unit. The expected inventory level of 2,500 units on December 31, 2011, is more than management's desired level for 2012, which is 20% of the next month's expected sales (in units). Expected sales are: January, 3,500 units; February, 4,500 units; March, 5,500 units; and April, 5,000 units. b, Cash sales and credit sales represent 25% and 75%. respectively, of total sales. Of the credit sales, 60% is collected in the first month after the month of sale and 40% in the second month after the month of sale. For the December 31 2011, accounts receivable balance, $62,500 is collected in January and the remaining $200,000 is collected in February. 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, 2011, accounts payable balance, $40,000 is paid in January and the remaining $140,000 is paid in February. d Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $30,000 per year eGeneral and administrative salaries are $72,000 per year Maintenance expense equals $1,000 per month and is paid in cash. t Equipment reported in the December 31, 2011, statement of financial position was purchased in January 2011. It is being depreciated over eight years under the straight-line method with no residual value. The following amounts for new equipment purchases are planned in the coming quarter: January, $18,000; February, $48,000; and March, $14,400. This equipment will be depreciated under the straight-line method over eight years with no residual value. A full month's depreciation is taken for the month in which equipment is purchased 9 The company plans to acquire land at the end of March at a cost of $75,000, which will be paid with cash on the last day of the month. h Simid 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 $12,500 in each month. 'The income tax rate for the company is 40%. Income tax on the first quarter's income will not be paid until April 15. Required: Prepare a master budget for each of the first three months of 2012; include the following component budgets: . Budgeted income statement for the entire first quarter (not for each month). (Input all amounts as positive values. Omit the "$" sign in your response.) SIMID SPORTS CO Budgeted Income Statement For Three Months Ended March 31, 2012 Click to select Click to select Click to select Click to select) Click to ts Click to select) Click to select) (Click to select Click to select) Click to select) Click to select Click to select) References Worksheet Leaming Objective: 23-C2 Learning Objective: 23-P2 Link both operating and capital Describe a master budget expenditures budgets to budgeted financial s and the process of preparing Difficulty: 3 Hard Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process Budgeted statement of financial position as at March 31, 2012. (Input all amounts as positive values. Be sure to list the assets in order of their liquidity. Leave no cells blank be certain to enter "O" wherever required. Omit the "$" sign in your response.) SIMID SPORTS CO Budgeted Statement of Financial Position March 31, 2012 Assets (Click to select) Click to select) Click to seloct) Total Current Assets Click to select) (Click to select) (Click to select) Total Assets Liabilities and Equity (Click to select) Click to select Click to select) Total Liabilities Click to select) Click to select) Total Stockholders' Equity Total Liabilities & Equity Near the end of 2011, the management of Simid Sports Co., a merchandising company, prepared the following estimated statement of financial position for December 31, 2011. SIMID SPORTS COMPANY Estimated Statement of Financial Position December 31, 2011 Assets Cash Inventony Total current assets $ 18,000 262,500 5,000 355,500 33,750 236,250 S591,750 Equipment $270,000 Total assets Liabilities and Equity Accounts payable Bank loan payable Tax payable (due 3/15/2012) 180,000 ,500 45,000 $232,500 Total liabilities Share capital-ordinary Retained earnings 236,250 123,000 Total stockholders' equity 359250 Total liabilities and equity $591,750 To prepare a master budget for January, February, and March of 2012, management gathers the following information. Simid Sports' single product is purchased for $30 per unit and resold for $55 per unit. The expected inventory level of 2,500 units on December 31, 2011, is more than management's desired level for 2012, which is 20% of the next month's expected sales (in units). Expected sales are: January, 3,500 units; February, 4,500 units; March, 5,500 units; and April, 5,000 units. b, Cash sales and credit sales represent 25% and 75%. respectively, of total sales. Of the credit sales, 60% is collected in the first month after the month of sale and 40% in the second month after the month of sale. For the December 31 2011, accounts receivable balance, $62,500 is collected in January and the remaining $200,000 is collected in February. 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, 2011, accounts payable balance, $40,000 is paid in January and the remaining $140,000 is paid in February. d Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $30,000 per year eGeneral and administrative salaries are $72,000 per year Maintenance expense equals $1,000 per month and is paid in cash. t Equipment reported in the December 31, 2011, statement of financial position was purchased in January 2011. It is being depreciated over eight years under the straight-line method with no residual value. The following amounts for new equipment purchases are planned in the coming quarter: January, $18,000; February, $48,000; and March, $14,400. This equipment will be depreciated under the straight-line method over eight years with no residual value. A full month's depreciation is taken for the month in which equipment is purchased 9 The company plans to acquire land at the end of March at a cost of $75,000, which will be paid with cash on the last day of the month. h Simid 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 $12,500 in each month. 'The income tax rate for the company is 40%. Income tax on the first quarter's income will not be paid until April 15. Required: Prepare a master budget for each of the first three months of 2012; include the following component budgets: . Budgeted income statement for the entire first quarter (not for each month). (Input all amounts as positive values. Omit the "$" sign in your response.) SIMID SPORTS CO Budgeted Income Statement For Three Months Ended March 31, 2012 Click to select Click to select Click to select Click to select) Click to ts Click to select) Click to select) (Click to select Click to select) Click to select) Click to select Click to select) References Worksheet Leaming Objective: 23-C2 Learning Objective: 23-P2 Link both operating and capital Describe a master budget expenditures budgets to budgeted financial s and the process of preparing Difficulty: 3 Hard Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process Budgeted statement of financial position as at March 31, 2012. (Input all amounts as positive values. Be sure to list the assets in order of their liquidity. Leave no cells blank be certain to enter "O" wherever required. Omit the "$" sign in your response.) SIMID SPORTS CO Budgeted Statement of Financial Position March 31, 2012 Assets (Click to select) Click to select) Click to seloct) Total Current Assets Click to select) (Click to select) (Click to select) Total Assets Liabilities and Equity (Click to select) Click to select Click to select) Total Liabilities Click to select) Click to select) Total Stockholders' Equity Total Liabilities & Equity