Problem 9-20 Completing a Master Budget (LO2] The following data relate to the second quarter operations of Leisure Sports, a wholesale distributor of consumer sporting goods, as of March 31: Cash Accounts receivable Inventory Building and equipment, net Accounts payable Common shares Retained earnings $ 9,000 48,000 12,600 214,100 18,300 190,000 75,400 a. Actual sales for March and budgeted sales for April through July are as follows: March (actual) April May June July $60,000 70,000 85,000 90,000 50,000 b. Sales are 20% cash and 80% credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. C. The company's gross margin is 40% of sales. d. Monthly expenses are as follows: salaries and wages $7,500 per month; shipping, 6% of sales; advertising, $6,000 per month; other expenses, 4% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $6,000 in total for the quarter. e. Each month's ending inventory should equal 30% of the following month's cost of goods sold. f. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. g. Equipment costing $11,500 will be purchased for cash in April and $3,000 will be purchased for cash in May. h. Dividends of $3,500 will be declared and paid in June. i. The company must maintain a minimum cash balance of $8,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. The monthly interest rate is 1%. Interest must be paid at the end of each month based on the total loans outstanding for that month. Required: Using the data above, complete the following: 1-a. Sales budget: June July Total sales Sales Budget March April May 60,000 $ 70,000 12,000 14,000 48,000 $ 56,000 $ Cash Credit $ 0 $ 0 $ 0 1-b. Schedule of expected cash collections: Schedule of Expected Cash Collections April May June 14,000 Quarter Cash sales Credit sales 48,000 Total collections 62,000 $ 0 $ O $ 0 2-a. Merchandise purchases budget: April May June Quarter $ 0 Budgeted cost of goods sold* $ 42,000 $ 51,000 Add desired ending inventoryt 15,300 Total needs $ 57,300 $ 51,000 $ 0 Less beginning inventory 12,600 Required purchases $ 44,700 $ 51,000 $ 0 *For April sales: $70,000 sales x 60% cost ratio tAt April 30: $51,000 ~ 30% At June 30: July sales $50,000 * 60% cost ratio ~ 30% $ 0 2-b. Schedule of expected cash disbursementsMerchandise purchases: May June Quarter April $ 18,300 22,350 22,350 March purchases April purchases May purchases June purchases Total disbursements $ 40,650 $ 22,350 $ 0 $ o 3. Schedule of expected cash disbursementsSelling and administrative expenses: May June Quarter Salaries and wages April $ 7,500 4,200 Shipping Advertising 6,000 Other 2,800 $ 20,500 $ Total disbursements 0 $ 0 $ 0 4. Cash budget: (Round your intermediate calculations and final answers to the nearest whole dollar. Also, round up your interest calculations to the next whole dollar amount. Cash deficiency, repayments and interest should be indicated by a minus sign.) May June Quarter April 9,000 $ $ Cash Budget Cash balance, beginning Add cash collections Total cash available 62,000 9,000 62,000 71,000 71,000 0 0 Less cash disbursements: 40,650 40,650 20,500 20,500 11,500 11,500 0 0 72,650 0 72,650 (1,650) (1,650) 0 0 For inventory purchases For selling and administrative expenses For equipment purchases For dividend payments Total cash disbursements Excess (deficiency) of cash Financing Borrowings Repayments Interest Total financing Cash balance, ending 0 0 0 0 $ (1,650) $ 0 $ 0 $ (1,650) 5. Prepare an absorption costing income statement for the quarter ended June 30. LEISURE SPORTS Income Statement For the Quarter Ended June 30 Sales 0 Cost of goods sold: Beginning inventory Add purchases Goods available for sale Ending inventory Gross margin Less Operating expenses: Shipping Depreciation 0 0 Commissions Advertising Rent Salaries and wages Other expenses 0 Operating income 0 Interest expense Net income $ 0 6. Prepare a balance sheet as of June 30. LEISURE SPORTS Balance Sheet June 30 Assets Current assets: Cash Account receivable Inventory Total current assets 0 Buildings and equipment, net Total assets $ 0 Liabilities and Stockholders' Equity Account payable Stockholders' equity: Common stock Retained earnings 0 Total liabilities and stockholders' equity $ 0