Near the end of 2015, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2015.

DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2015
Assets
Cash	$	35,500
Accounts receivable		520,000
Inventory		100,000
Total current assets				$	655,500
Equipment	$	536,000
Less accumulated depreciation		67,000
Equipment, net					469,000
Total assets				$	1,124,500
Liabilities and Equity
Accounts payable	$	355,000
Bank loan payable		15,000
Taxes payable (due 3/15/2016)		88,000
Total liabilities				$	458,000
Common stock		473,500
Retained earnings		193,000
Total stockholders equity					666,500
Total liabilities and equity				$	1,124,500

To prepare a master budget for January, February, and March of 2016, management gathers the following information.

a.	Dimsdale Sports single product is purchased for $20 per unit and resold for $55 per unit. The expected inventory level of 5,000 units on December 31, 2015, is more than managements desired level for 2016, which is 20% of the next months expected sales (in units). Expected sales are: January, 6,750 units; February, 8,750 units; March, 11,000 units; and April, 9,500 units.
b.	Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 59% is collected in the first month after the month of sale and 41% in the second month after the month of sale. For the December 31, 2015, accounts receivable balance, $120,000 is collected in January and the remaining $400,000 is collected in February.
c.	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, 2015, accounts payable balance, $80,000 is paid in January and the remaining $275,000 is paid in February.
d.	Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $84,000 per year.
e.	General and administrative salaries are $144,000 per year. Maintenance expense equals $2,100 per month and is paid in cash.
f.	Equipment reported in the December 31, 2015, balance sheet was purchased in January 2015. 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, $35,000; February, $97,000; and March, $29,000. 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 $160,000, 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 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 $22,813 in each month.
i.	The income tax rate for the company is 41%. Income taxes on the first quarters income will not be paid until April 15.

Required:

Prepare a master budget for each of the first three months of 2016; include the following component budgets:

DIMSDALE SPORTS CO.
Cash Budget
January, February, and March 2016
	January	February	March
Beginning cash balance	$35,500	$22,813	$204,054
Cash receipts from customers	212,813	684,591	478,362
Total cash available	248,313	707,404	682,416
Cash disbursements:
Sales commissions	74,250	96,250	121,000
Purchases of equipment	35,000	97,000	29,000
Purchase of land	0	0	160,000
Taxes payable	0	0	88,000
General & administrative salaries	12,000	12,000	12,000
Interest on bank loan	150	0	0
Maintenance expense	2,100	2,100	2,100
Payments for merchandise	80,000	289,000	92,800
Sales salaries	7,000	7,000	7,000
Total cash disbursements	210,500	503,350	511,900
Preliminary cash balance	37,813	204,054	170,516
Additional loan (loan repayment)	(15,000)	0	0
Ending cash balance	$22,813	$204,054	$170,516
Loan balance
	January	February	March
Loan balance - Beginning of month	$15,000	$0	$0
Additional loan (loan repayment)	(15,000)	0	0
Loan balance - End of month	$0	$0	$0

Answer is complete and correct

	January	February	March	Total
Equipment - beginning of month	$536,000	$571,000	$668,000
Equipment purchases	35,000	97,000	29,000
Equipment - end of month	$571,000	$668,000	$697,000
Monthly depreciation expense	$5,948	$6,958	$7,260	$20,166
DIMSDALE SPORTS CO.
General and Administrative Expense Budget
January, February, and March 2016
	January	February	March	Total
Depreciation expense	$5,948	$6,958	$7,260	$20,166
Maintenance expense	2,100	2,100	2,100	6,300
Salaries expense	12,000	12,000	12,000	36,000
Total	$20,048	$21,058	$21,360	$62,466

Answer is complete and correct

DIMSDALE SPORTS COMPANY
Capital Expenditures Budget
January, February, and March 2016
	January	February	March	Total
Equipment purchases	$35,000	$97,000	$29,000	$161,000
Land purchase	0	$0	160,000	160,000
Total	$35,000	$97,000	$189,000	$321,000

Answer is not complete

DIMSDALE SPORTS CO.
Budgeted Income Statement
For Three Months Ended March 31, 2016
Sales		$1,457,500
Cost of goods sold		530,000
Gross profit		927,500
Operating expenses
Sales commissions expense	291,500
Sales salaries expense	21,000
General administrative salaries	36,000
Depreciation expense
Interest expense	150
Maintenance expense	6,300
Total operating expenses		354,950
Income before taxes		572,550
Income tax expense
Net income		$572,550

Answer is complete but not entirely correct

DIMSDALE SPORTS CO.
Budgeted Balance Sheet
March 31, 2016
Assets
Cash	$0
Accounts receivable	0
Merchandise Inventory	38,000
Total current assets		$38,000
Land		160,000
Equipment	0
Accumulated depreciation	0
Equipment, net		0
Total assets
Liabilities and Equity
Liabilities
Accounts payable	0
Bank loan payable	0
Income taxes payable	0
	0
Total liabilities
Stockholders' Equity
Common stock	473,500
Retained earnings	0
Total Stockholders' Equity
Total Liabilities and Equity