PROBLEM 10-4. Master Budget [LO 2] The Schrdinger Science Store operates a retail store in a local shopping mall. The results of operations for the fourth quarter of 2017 are as follows: Sales $350,000 Less cost of sales 205,000 Gross margin 145,000 Less selling, general, and administrative expenses 50,000 Income before taxes 95,000 Less income taxes 38,000 Net income $ 57,000 Additional information: 1. Sales and cost of sales are expected to increase by 10 percent, are expected to increase by 12 percent, in each of the next two quarters. 2.75 percent of sales are collected in the quarter of sale, and 25 percent are collected in the quarter following sale. 3. The balance in accounts receivable at the end of 2017 relates to sales in the fourth quarter of 2017 4. Inventory purchases in the fourth quarter of 2017 are $200,000. 5. The balance in accounts payable at the end of 2017 relates to purchases in the fourth quarter of 2017. 6. Inventory at the end of 2017 is $150,000. For 2018, the company plans to hold ending inventory equal to 65 percent of subsequent quarter cost of sales. 7. Selling and administrative expenses are expected to increase by $8,000 due to increases in advertising and salaries. All other expenses in this category are expected to remain constant. 8. Fifty percent of inventory purchases are paid in the quarter of purchase, and 50 percent are paid in the following quarter. All other expenses, including taxes, are paid in the quarter incurred. 9. Selling, general, and administrative expense includes $2,500 of depreciation related to furniture and fixtures with a book value (net of accumulated depreciation) of $50,000 at the end of 2017 10. The tax rate is expected to remain at 40 percent. 11. The cash balance at the end of 2017 is $40,000. 12. Common stock at the end of 2017 is $80,000 and retained earnings is $147,500. 13. Asset accounts are cash, accounts receivable, inventory, and furniture and fixtures. The only liability account is accounts payable. Owner's equity accounts are common stock and retained earnings. REQUIRED a. Prepare a budgeted income statement for the first quarter of 2018. b. Prepare a cash budget for the first quarter of 2018. c. Prepare a budgeted balance sheet as of the end of the first quarter of 2018. d. The company is discussing the possibility of opening a new store late in the first quarter of 2018. A store opening would require cash payments of $50,000. Assuming the company wants a minimum cash balance of $30,000 at the end of the first quarter, can a new store be opened with- out obtaining additional funds