Near the end of 2013 the management of Dimsdale Sports Co a merchandising company, prepared the following estimated balance sheet for december 31, 2013...

Estimated Balance Sheet

ASSETS

Cash.....$36,000

Accts Receivable.....525,000

Inventory.....150,000

Total Current Assets.....$711,000

Equipment.....$540,000

Less Accum. Depreciation.....67,500

Equipment Net.....$472,500

Total Assets.....$1,183,500

LIABILITIES & EQUITY

Accounts payable.....$360,000

Bank Loan Payable.....15,000

Taxes Payable (Due 3/15/14).....90,000

Total Liabilities.....$465,000

Common Stock.....472,500

Retained Earnings.....246,000

Total Stockholders Equity.....$718,500

Total Liabilities and Equity.....$1,183,500

To prepare a master budget for January, February, and March of 2014, management gathers the following information.

a. Dimsdale Sports single product is purchased for $30/unit and resold for $55/unit. The expected inventroy level of 5,000 units on Dec 31, 2013 is more than management's desired level for 2014, which is 20% of the next months expected sales (in units). Expected sales are: January, 7,000 units; February, 9,000 units; March 11,000 units; April, 10,000 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, 2013 accts receivable balance, $125,000 is collected in January and the remianing $400,000 is collected in February.

c.Merchandise purchases are paid for as follows: 20% in the first month after the 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.

D. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $60,000 per year.

e.General and Admin salaries are $144,000 per year. Maintenance expense equals $2,000 per month and is paid in cash.

f.Equipment reported in Dec 31, 2013 balance sheet was purchased in January2013. It is being depraciated 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 months depreciation is taken for the month in which equipment is purchased.

g.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.

h. Dimsdale Sports has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interesr 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.

i. The income tax rate for the company is 40%. Income taxes on the first quarters income will not be paid until April 15.

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 to the nearest dollar):

1.Monthly sales budgets (showing both budgeted unit sales and dollar sales)

2.Monthly merchandise purchases budgets

3.Monthly selling expense budgets

4.Monthly General and Admin Expense budgets

5.Monthly capital expenditures budgets

6.Monthyl cash budgets

7.Budgeted income statement for the entire first quarter (not for each month).