Near the end of 2013, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2013 Assets show the following information (all amounts in dollars): Cash, 36,000 (in the left column). Accounts receivable, 525,000 (in the left column). Inventory, 150,000 (in the left column). Total current assets, 711,000 (in the right column). Equipment, 540,000 (in the left column). Less accumulated depreciation, 67,500 (in the left column). Equipment, net, 472,500 (in the right column). Total assets, 1,183,500 (in the right column). Liabilities and Equity show the following information (all amounts in dollars): Accounts payable, 360,000 (in the left column). Bank loan payable, 15,000 (in the left column). Taxes payable (due 3/15/2014), 90,000 (in the left column). Total liabilities, 465,000 (in the right column). Common stock, 472,500 (in the left column). Retained earnings, 246,000 (in the left column). Total stockholders' equity, 718,500 (in the right column). Total liabilities and equity, 1,183,500 (in the right column). To prepare a master budget for January, February, and March of 2014, management gathers the following information. Dimsdale Sports' 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, 11,000 units; and April, 10,000 units. 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, 2013, accounts receivable balance, $125,000 is collected in January and the remaining $400,000 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, 2013, accounts payable balance, $80,000 is paid in January and the remaining $280,000 is paid in February. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $60,000 per year. General and administrative salaries are $144,000 per year. Maintenance expense equals $2,000 per month and is paid in cash. 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, $36,000; February, $96,000; and March, $28,800. 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. The company plans to acquire land at the end of March at a cost of $150,000, which will be paid with cash on the last day of the month. Dimsdale 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 $25,000 in each month. The income tax rate for the company is 40%. 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 (show supporting calculations as needed, and round amounts to the nearest dollar): Monthly sales budgets (showing both budgeted unit sales and dollar sales). Monthly merchandise purchases budgets. Monthly selling expense budgets. Monthly general and administrative expense budgets. Monthly capital expenditures budgets. Monthly cash budgets. Budgeted income statement for the entire first quarter (not for each month). Budgeted balance sheet as of March 31, 2014. P22-5A
Sales Budget
	January	February	March	Total
Budgeted Units
Budgeted Unit Sales Price
Budgeted Sales in Dollars
Total
Merchandise Purchases Budget
	January	February	March	Total
Next Period's unit sales
Ratio of inventory to future sales
Budgeted ending inventory
Add Budgeted sales
Required available merchandise
Less Beginning Inventory
Units to be purchased
Budgeted Cost Per Unit
Budgeted merchandise purchases
Selling Expense Budget
	January	February	March	Total
Budgeted Sales
Sales commission percent
Sales Commissions Expense
Sales Salaries
Total Selling Expenses
General and Administrative Expense Budget
	January	February	March	Total
Salaries
Maintenance
Depreciation
Total Expenses
Depreciation Expense Calculations	January	February	March	Total
Capital Expenditures Budget
	January	February	March	Total
Equipment Purchases
Land Purchase
Total
Budgeted Cash Collections from Customers
	January	February	March	Total
Total Sales
Cash Sales
Credit Sales
Cash Collections
Receivables
Month after sale
Second Month
Total from Credit customers
Cash Sales
Total Cash Received
Budgeted Cash Payments for Purchases
	January	February	March	Total
Credit Purchases
Accounts Payable
Month after purchase (20%)
Second month (80%)
Total paid for purchases
Cash Budget
	January	February	March
Beginning Cash Balance
Cash Receipts from Customers
Total Cash Available
Cash Disbursements:
Payments for Purchases
Sales Commissions
Sales Salaries
General & Administrative Salaries
Maintenance Expense
Interest
Taxes Payable
Purchase of Equipment
Purchase of land
Total Cash Disbursements
Preliminary Balance
Repayment of loan to bank
Ending Cash Balance
Loan balance, end of month
Dimsdale Sports Co.
Budgeted Income Statement
For the Quarter ended March 31, 2014
Budgeted Balance Sheet
Dimsdale Sports Co.
Budgeted Balance Sheet
31-Mar-14
Assets
Cash				Cash budget
Accounts receivable				Note 1
Inventory				Note 2
Total Current Assets
Land				Capital budget
Equipment				Note 3
Less accumulated depreciation				Note 4
Total Assets
Liabilities and Equity
Accounts payable				Note 5
Bank loan payable				Cash Budget
Taxes payable				Income Statement
Total liabilities
Common stock
Retained earnings				Note 6
Total stockholders' equity
Total liabilities and equity
Budgeted Statement of Cash Flows
Dimsdale Sports Co.
Budgeted Statement of Cash Flows
For the Quarter ended March 31, 2013