Problem 07-8AA Merchandising: Preparation of a complete master budget LO P4 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 $ 36,500 Accounts receivable 520,00 Inventory 105,000 Total current assets $ 661,500 Equipment 588,000 Less: Accumulated depreciation 73,500 Equipment, net 514,500 Total assets $1,176,000 Liabilities and Equity Accounts payable $355,800 Bank loan payable 12,000 Taxes payable (due 3/15/2820) 89,000 Total liabilities $ 456,000 Common stock 472,500 Retained earnings 247,500 Total stockholders' equity 720,000 Total liabilities and equity $1,176,000 To prepare a master budget for January, February, and March of 2020, management gathers the following information a. The company's single product is purchased for $20 per unit and resold for $56 per unit. The expected inventory level of 5.250 units on December 31, 2019. is more than management's desired level, which is 20% of the next month's expected sales in units) Expected sales are January 7.250 units: February 8.750 units: March 11.500 units, and April 10.500 units b. 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, $125,000 is collected in January 2020 and the remaining 5395,000 is collected in February 2020 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, 2019, accounts payable balance. $60,000 is pard in January 2020 and the remaining $295,000 is paid in February 2020 d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions are 590.000 per year e. General and administrative salaries are $144,000 per year Maintenance expense equals 51800 per month and is paid in cash t. Equipment reported in the December 31, 2019, balance sheet was purchased in January 2019. is being deprecated 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, 536,000, February $98,400, and March $26.400. This equipment will be deprecated 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 The company plans to buy and at the end of March at a cost of $145.000, which will be pard with cash the last day of the month h. The company has a working arrangement with its bank to obtain additional loans as needed. The wterest rates 12% per year and terest 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 547000 at the end of each month 1. The income tax rate for the company is 37%. Income taxes on the first quarter's income will not be podrl Apel Required: Prepare a master budget for each of the first three months of 2020, indude the following component budgets 2. Monthly merchandise purchases budgets 3. Monthly selling expense budgets 4. Monthly general and administrative expense budgets 5. Monthly capital expenditures budgets 6. Monthly cash budgets 7. Budgeted income statement for the entire first quarter that for each month 8. Budgeted balance sheet as of March 31 2020 Complete this question by entering your answers in the tabs below Pw Required 1 Required 2 Required > Required 4 Required Required 6 Required 6 Required 7 Required Calculate the budgeted cash receipts and cash payments. (Negative values should be indicated with minus sign. Round your final answers to the nearest whole dollar) Calculation of Cash receipts from customers March January 125,000 February 396,000 Sales in units Selling price per unit Total budgeted sales Cash sales Sales on credit 75% March 31 Receivable -Collected in January February 125,000 $ 395,000 Total 520 000 $ March $ Accounts Receivable - January 1 Credit sales from $ 0 0 January February March Total collection of receivables o $ 125,000 $ 395.000 $ OS 0 Total cash receipts from customers January February March Collections of receivables Calculation of payments for merchandise: January February March Desired ending inventory (unit) Budgeted sales in units Total required Beginning inventory (unit) Number of units to be purchased Cost per Total cost of purchases March 31 March Payable Account Paye January 1 Merchandise purchases in February 60,000 $ 295,000 355.000 5 0 February March 0 $ 50.000 5 256.000 5 05