Planning for Profit and Cost Contr Problem 7-23B Preparing a master budget for a retail company with no beginning account balances LO 7-2,7-3, 7-1 Inwood Gifts Corporation begins business today, December 31, 2017. Rebecca Ortiz, the president, is trying to prepare the company's master budget for the first three months January, February, and pare the budget based on the following specifications: Required January sales are estimated to be $500,000, of which 30 percent will be cash and 70 percent will be credit. The company expects sales to increase at the rate of 10 percent per month. Prepare a sales budget b. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts. c. The cost of goods sold is 50 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month's cost of goods sold. The ending inventory of March is expected to be $66,000. Assume that all purchases are made on account. Prepare an in- ventory purchases budget. d. The company pays 60 percent of accounts payable in the month of purchase and the remaining 40 percent in the following month. Prepare a cash payments budget for inventory purchases. e Budgeted selling and administrative expenses per month follow: Salary expense (fixed) $50,000 Sales commissions 8% of sales Supplies expense 4% of sales Utilities (fixed) $3,600 Depreciation on store fixtures (fixed)" $10,000 Rent (fixed) $14.400 Miscellaneous (fixed) $4,000 "The capital expenditures budget indicates that Inwood will spend $700,000 on January 1 for store fixtures. The fixtures are expected to have a $100,000 salvage value and a five-year (60-month) useful life. Use this information to prepare a selling and administrative expenses budget. 1. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and ad- ministrative expenses. 8. The company borrows funds, in increments of $1,000, and repays them in any amount available on the last day of the month. It pays interest of 1.5 percent per month in cash on the last day of the month. For safety, the company desires to maintain a $100,000 cash cushion. The company pays its vendors on the last day of the month. Prepare a cash budget. h. Prepare a pro forma income statement for the quarter. Prepare a pro forma balance sheet at the end of the quarter. Prepare a pro forma statement of cash flows for the quarter