PLEASE ONLY QUESTION 5 and 6

Pele Solar Company is a small, rapidly growing wholesaler of solar panels. Bobby Moore, Pele's general manager of marketing, predicts sales of 100,000 units in January 2023, increasing by 15% each month during 2023. Sales revenue in January 2023 is forecast to be $800,000. The sales price will remain constant in 2023. Pele's projected balance sheet as at 31 December 2022 is provided as follows: $ Cash 50,000 Accounts receivable 472,500 Inventory 280,000 Buildings and equipment (net of accumulated depreciation) 307,500 Total assets $1,110,000 Accounts payable 315,000 Interest payable 12,500 Long-term borrowings (10%, due in 6 years time) 300,000 Share capital 361,400 Retained earnings 121,100 Total liabilities and shareholders' equity $1,110,000 Cristiano Ronaldo (the assistant accountant) is now preparing a monthly budget for the first quarter of 2023, and he needs your help. So far, the following information has been accumulated: Projected sales for December 2022 are $700,000. Credit sales typically are 75 per cent of total sales, with the remainder being cash sales. Pele's credit experience indicates that 10 per cent of the credit sales are collected during the month of sale, and the remainder are collected during the following month. Pele's cost of goods sold generally runs at 70 per cent of sales. Inventory is purchased on credit, and 40 per cent of each month's purchases are paid during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to have inventory at the end of each month equal to one-half of the next month's projected cost of goods sold. Ronaldo has already prepared the purchases budget for the quarter to save you some work: purchases budget Jan Feb Mar

cogs 560000 644000 740600

less opening inventory 280000 322000 370300

plus closing inventory 322000 370300 425845

= purchases 602000 692300 796145 Ronaldo has estimated that Pele's monthly cash expenses will be as follows: Sales salaries $21,000 Advertising and promotion $16,000 Administrative salaries $21,000 Other expenses are listed below: Depreciation $25,000 Interest on long-term borrowings $2,500 In addition, sales commissions run at the rate of 1 per cent of sales revenue. On January 1, a one-off payment of $175,000 is required to purchase new equipment. No depreciation is required to be calculated for this new equipment. Ronaldo believes that Pele needs to keep a minimum cash balance of $25,000. A short-term credit facility for $100,000 has been arranged with a local bank. The bank has given Pele an introductory offer of 0% interest for the first three months of 2023, although interest of 12% per annum will apply for amounts borrowed after 31 March 2023. Ronaldo has decided that Pele should re-pay any short-term loan required as soon as possible. Interest on Pele's long-term borrowings is paid semi-annually, on 31 January and 31 July, for the preceding six-month period. Required: You are required to prepare Pele's budget for the first quarter of 2023 by completing the following schedules and statements: 1. Sales budget in units and revenue (1 mark) 2. Cash receipts budget (1.5 marks) 3. Cash payments budget (1.5 marks) 4. Summary cash budget (2 marks) 5. Prepare Pele Solar's budgeted Income Statement for the first quarter using a standard absorption costing approach (Ignore income taxes) (2 marks) 6. Prepare Pele Solar's budgeted Balance Sheet as at 31 March