Near the end of 2017, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2017 DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2017 Assets Cash Accounts receivable Inventory Total current assets Equipment Less: accumulated depreciation 36,000 525,000 150,000 $711,000 540,000 67,500 Equipment, net Total assets 472,500 $1,183,500 Liabilities and Equity Accounts payable Bank loan payable Taxes payable (due 3/15/2018) Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity $360,000 15,000 90,000 465, 000 472,500 246,000 718,500 $1,183,500 To prepare a master budget for January, February, and March of 2018, management gathers the following information a. The company's 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, 2017, is more than management's desired level, 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 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, 2017, accounts receivable balance, $125,000 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, 2017, 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 administrative salaries are $144,000 per year. Maintenance expense equals $2,000 per month and is paid in cash f. Equipment reported in the December 31, 2017, balance sheet was purchased in January 2017. 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 g. The company plans to buy 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. The company 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 at the end of each month i. The income tax rate for the company is 40%. Income taxes on the first quarter's income will not be paid until April 15 DIMSDALE SPORTS CO. Merchandise Purchases Budget January, February, and March 2018 January February March 9,000 20% 10,000 Next month's budgeted sales (units) Ratio of inventory to future sales 11,000 20% 20% Required units of available merchandise Units to be purchased Selling Expense Budget January, February, and March 2018 January February March Budgeted sales Sales commissions March January S 540,000 February Equipment -beginning Equipment purchases Equipment end of month of month DIMSDALE SPORTS CO General and Administrative Expense Budget January, February, and March 2018 January February March Calculate the budgeted cash receipts and cash payments. (Negative values should be indicated with minus sign.) Calculation of Cash receipts from customers: January February March Sales in units Selling price per unit Total budgeted sales Cash sales Sales on credit 25% 75% Collected in March 31 TotalJanuary February March Receivable Accounts Receivable - January 525,000 125,000400,000 Credit sales from: January February Cash Budget January, February, and March 2018 January February March Beginning cash balance Total cash available Cash payments for: Total cash payments Preliminary cash balance Ending cash balance Loan balance January February March Loan balance Beginning of month Additional loan (loan repayment) Loan balance End of month Budgeted Income Statement For Three Months Ended March 31, 2018 Operating expenses Total operating expenses Assets Total current assets Equipment, net Total assets Liabilities and Equity Liabilities Bank loan payable Total liabilities Stockholders' Equity Total Stockholders' Equity