Near the end of 2019, the management of Dimsdale Sports Co , a merchandising company, prepared the following estimated balance sheet for December 31, 2019 DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2019 Assets Cash $ 36,000 Accounts receivable 520,000 Inventory 135,000 Total current assets $ 691,000 Equipment 600,000 Less Accumulated depreciation 75,000 Equipment, net 525,000 Total assets $ 1,216,000 Liabilities and Equity Accounts payable $ 340,000 Bank loan payable 12,000 Taxes payable (due 3 15 2020) 88,000 Total liabilities $ 440,000 Common stock 473,500 Retained earnings 302,500 Total stockholders equity 776,000 Total liabilities and equity $ 1,216,000 To prepare a master budget for January, February, and March of 2020, management gathers the following information The companys single product is purchased for $30 per unit and resold for $60 per unit The expected inventory level of 4,500 units on December 31, 2019, is more than managements desired level, which is 20 of the next months expected sales (in units) Expected sales are January, 6,750 units February, 8,750 units March, 10,500 units and April, 10,500 units Cash sales and credit sales represent 25 and 75 , respectively, of total sales Of the credit sales, 63 is collected in the first month after the month of sale and 37 in the second month after the month of sale For the December 31, 2019, accounts receivable balance, $120,000 is collected in January 2020 and the remaining $400,000 is collected in February 2020 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, 2019, accounts payable balance, $70,000 is paid in January 2020 and the remaining $270,000 is paid in February 2020 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 $132,000 per year Maintenance expense equals $1,800 per month and is paid in cash Equipment reported in the December 31, 2019, balance sheet was purchased in January 2019 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, $100,800 and March, $19,200 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 The company plans to buy 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 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 $35,000 at the end of each month The income tax rate for the company is 37 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 2020 include the following component budgets 6 Monthly cash budgets 7 Budgeted income statement for the entire first quarter (not for each month) 8 Budgeted balance sheet as of March 31, 2020 DIMSDALE SPORTS CO Cash Budget January, February, and March 2020 January February March Beginning cash balance Total cash available Cash payments for 0 0 0 Total cash payments Preliminary cash balance 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 DIMSDALE SPORTS CO Budgeted Income Statement For Three Months Ended March 31, 2020 Operating expenses Total operating expenses Budgeted balance sheet as of March 31, 2020 (Round your final answers to the nearest whole dollar ) DIMSDALE SPORTS CO Budgeted Balance Sheet March 31, 2020 Assets Total current assets Equipment, net Total assets Liabilities and Equity Liabilities Bank loan payable Total liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 18, 2024

Near the end of 2019, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2019. DIMSDALE

Near the end of 2019, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2019.

DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2019
Assets
Cash	$	36,000
Accounts receivable		520,000
Inventory		135,000
Total current assets			$	691,000
Equipment		600,000
Less: Accumulated depreciation		75,000
Equipment, net				525,000
Total assets			$	1,216,000
Liabilities and Equity
Accounts payable	$	340,000
Bank loan payable		12,000
Taxes payable (due 3/15/2020)		88,000
Total liabilities			$	440,000
Common stock		473,500
Retained earnings		302,500
Total stockholders equity				776,000
Total liabilities and equity			$	1,216,000

To prepare a master budget for January, February, and March of 2020, management gathers the following information.

The companys single product is purchased for $30 per unit and resold for $60 per unit. The expected inventory level of 4,500 units on December 31, 2019, is more than managements desired level, which is 20% of the next months expected sales (in units). Expected sales are January, 6,750 units; February, 8,750 units; March, 10,500 units; and April, 10,500 units.
Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 63% is collected in the first month after the month of sale and 37% in the second month after the month of sale. For the December 31, 2019, accounts receivable balance, $120,000 is collected in January 2020 and the remaining $400,000 is collected in February 2020.
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, 2019, accounts payable balance, $70,000 is paid in January 2020 and the remaining $270,000 is paid in February 2020.
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 $132,000 per year. Maintenance expense equals $1,800 per month and is paid in cash.
Equipment reported in the December 31, 2019, balance sheet was purchased in January 2019. 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, $100,800; and March, $19,200. 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.
The company plans to buy 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.
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 $35,000 at the end of each month.
The income tax rate for the company is 37%. 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 2020; include the following component budgets.

image text in transcribed 6. Monthly cash budgets. 7. Budgeted income statement for the entire first quarter (not for each month). 8. Budgeted balance sheet as of March 31, 2020.

DIMSDALE SPORTS CO. Cash Budget January, February, and March 2020 January February March Beginning cash balance Total cash available Cash payments for: 0 0 0 Total cash payments Preliminary cash balance 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 DIMSDALE SPORTS CO. Budgeted Income Statement For Three Months Ended March 31, 2020 Operating expenses Total operating expenses Budgeted balance sheet as of March 31, 2020. (Round your final answers to the nearest whole dollar.) DIMSDALE SPORTS CO. Budgeted Balance Sheet March 31, 2020 Assets Total current assets Equipment, net Total assets Liabilities and Equity Liabilities Bank loan payable Total liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity