Problem 20-8AA (Algo) Merchandising: Preparation of a complete master budget LO P4 Dimsdale Sports, a merchandising company, reports the following balance sheet at December 31. DIMSDALE SPORTS COMPANY Balance Sheet Cash Assets Accounts receivable December 31 $ 22,000 520,000 Inventory Equipment 100,000 Less: Accumulated depreciation Total assets Liabilities $ 600,000 75,000 525,000 $ 1,167,000 Liabilities and Equity Accounts payable Loan payable Taxes payable (due March 15) Equity Common stock $ 345,000 13,000 92,000 450,000 Retained earnings Total liabilities and equity $ 470,000 247,000 717,000 $ 1,167,000 To prepare a master budget for January, February, and March, use the following information. a. The company's single product is purchased for $20 per unit and resold for $57 per unit. The inventory level of 5,000 units on December 31 is more than management's desired level, which is 20% of the next month's budgeted sales units. Budgeted sales are January, 6,750 units; February, 9,250 units; March, 11,500 units; and April, 11,000 units. All sales are on credit. b. Cash receipts from sales are budgeted as follows: January, $240,425; February, $706,690; March, $522,833. c. Cash payments for merchandise purchases are budgeted as follows: January, $65,000; February, $294,400; March, $96,400. d. Sales commissions equal to 20% of sales dollars are paid each month. Sales salaries (excluding commissions) are $5,500 per month.