Problem 7-8AA (Algo) Merchandising: Preparation of a complete master budget LO P4 Dimsdale Sports, a merchandising company, reports the following balance sheet at December 31 DINSDALE SPORTS COMPANY Balance Sheet December 31 Assets Cash Accounts receivable Inventory Equipment Less: Accumulated depreciation Total assets Liabilities and Equity Liabilities Accounts payable Loan payable Taxes payable (due March 15) Equity $ 576,000 72,000 $ 340,000 13,000 89,000 $ 21,500 520,000 95,000 $ 471,000 227,500 504,000 $1,140,500 442,000 Common stock Retained earnings 698,500 Total liabilities and equity $ 1,140,500 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 4.750 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, 7,500 units; February, 8,750 units; March, 11,000 units; and April, 9,000 units. All sales are on credit. b. Cash receipts from sales are budgeted as follows: January, $269,625; February, $732,952: March, $523,723. c. Cash payments for merchandise purchases are budgeted as follows: January, $70,000: February, $288.000; March, $108.800. d. Sales commissions equal to 20% of sales dollars are paid each month. Sales salaries (excluding commissions) are $7,000 per month. e. General and administrative salaries are $12.000 per month. Maintenance expense equals $1,800 per month and is paid in cash f. New equipment purchases are budgeted as follows: January, $38,400: February $91.200, and March, $24,000. Budgeted depreciation expense is January, $ 6,400: February, $7,350; and March, $7,600 g. The company budgets a land purchase at the end of March at a cost of $140.000, which will be paid with cash on the last day of the month. h. The company has an agreement with its bank to obtain additional loans as needed. The interest rate is 1% per month and interest is paid at each month-end based on the beginning-month balance. Partial or full payments on these loans are made on the last day of the month. The company maintains a minimum ending cash balance of $21,500 at the end of each month. i. The income tax rate for the company is 43%. Income taxes on the first quarter's income will not be paid until April 15. Required: Prepare a master budget for the months of January, February, and March that has the following budgets: 1. Sales budgets. 2. Merchandise purchases budgets. 3. Selling expense budgets. 4. General and administrative expense budgets. Hint: Depreciation is included in the general and administrative budget for merchandisers 5. Capital expenditures budgets. 6. Cash budgets. 7. Budgeted income statement for entire quarter (not monthly) ended March 31 8. Budgeted balance sheet as of March 31. Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Sales budgets. Budgeted sales units Selling price per unit Total budgeted sales Required 3 Required 4 DIMSDALE SPORTS Sales Budget January February Required 1 Required 5 Required 6 March Totals Required 2 > I Required 7 Required 8 Merchandise purchases budgets. Next period budgeted sales units Ratio of inventory to future sales Desired ending inventory units Total required units Units to be purchased Cost per unit Cost of merchandise purchases DIMSDALE SPORTS Merchandise Puprases Budget February January < Required 1 Required 3 > March Required 1 Required 2. Selling expense budgets. Budgeted sales Sales commissions Required 3 Required 4 DIMSDALE SPORTS Selling Expense Budget January Required 5 February < Required 2 Required 6 March Required 4 > Required 7 Required 8 Complete this question by entering your answers in the tabs below. Required 1 Required 2 General and administrative merchandisers. Required 3 Required 4 Required 5 Required 6 Required 7 Required expense budgets. Hint: Depreciation is included in the general and administrative budget for DIMSDALE SPORTS General and Administrative Expense Budget January February Total general and administrative expenses < Required 3 March Required 5 > Total Capital expenditures budgets. Total capital expenditures DIMSDALE SPORTS Capital Expenditures Budget February January < Required 4 March Required 6 > Cash budgets. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.) Beginning cash balance Total cash available Less Cash payments for Total cash payments Preliminary cash balance Ending cash balance DIMSDALE SPORTS COMPANY Cash Budget Loan balance - Beginning of month Additional loan (loan repayment) Loan balance End of month January Loan balance January < Required 5 February February March March Required 7 > Budgeted income statement for the entire first quarter (not for each month). (Round your final answers to the nearest whole dollar.) DIMSDALE SPORTS COMPANY Budgeted Income Statement For Three Months Ended March 31 Selling, general and administrative expenses Total operating expenses < Required 6 Required 8 Budgeted balance sheet as of March 31. (Round your final answers to the nearest whole dollar.) DIMSDALE SPORTS COMPANY Budgeted Balance Sheet March 31 Assets Total assets Liabilities Equity Total Liabilities and Equity Liabilities and Equity