ption Emphasis Heading Heading Heading 2 Index IN Paragraph Sis PROBLEM 1 Completing a Master Budget (L04] The following data relate to the operations of Lim Corporation, a wholesale distributor of consumer goods Current assets as of December 31 Cash $6,000 Accounts receivable $36,000 Inventory $9,800 Buildings and equipment, net $110,885 Accounts payable $32,550 Common shares $100,000 Retained earnings $30,135 a. The gross margin is 30% of sales (In other words, cost of goods sold is 70% of sales.) b. Actual and budgeted sales data are as follows: December (actual) $60,000 January $70,000 February $80,000 March $85,000 April $55,000 C. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales d Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold 16C acer 1 Caption Emphasis T Heading Heading 1 Heading 2 Tindex Paragraph Styles e. One quarter of a month's inventory purchases is paid for in the month of purchase the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory f. Monthly expenses are as follows commissions, $12,000, rent, S1,800, other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. g. Equipment will be acquired for cash: $3,000 in January and $8,000 in February h Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $ 1.000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would as far as it is able repay the loan plus accumulated interest at the end of the quarter Required: Using the data above 1. Complete the following schedule: 16C ORI 20er Paragraph Styles Using the data above 1. Complete the following schedule: Schedule of Expected Cash Collections January February March Quarter Cash sales $28,000 32,000 34,000 94,000 Credit sales 36.000 42.000 48,000 126,000 Total collections $64,000 74,000 82,000 220,000 2. Complete the following: Merchandise Purchasing Budget Budgeted cost of goods sold Add desired ending inventory Total needs Less beginning inventory Required purchases January $49,000 11.200** $60,200 9.800 $50,400 February 56,000 11 900 67 900 11,200 March 59,500 11 900 71,400 11 900 59,500 Quarter 164,500 11.900 176.400 9.800 166.600 56.700 * $70,000 sales X 70% - $49,000 ** $80,000 X 70% X 20% - $11,200 acer Paragraph Styles Schedule of Expected Cash Disbursements - Merchandise Purchases January February March Quarter December purchases $32,550 $32,550 January purchases 12,600 $37,800 54.400 February purchases 14,175 42,525 56,700 March purchases 14875 14.875 Total disbursements $45,150 51 975 57 400 154,525 * Beginning balance of the accounts payable 3. Complete the following schedule: Schedule of Expected Cash Disbursements - Selling and Administrative Expenses January $12,000 Commissions Rent Other expenses Total disbursements 1.800 February 12,000 1,800 6.400 20 200 March 12 000 1,800 6800 20600 Quarter 36,000 5,400 18 800 60 200 5.600 $19.400 16C Most o 3 E acer Y TS = = = si 1 Caption Emphasis 1 Heading Heading 1 Heading 2 1 Index Nort Paragraph Styles 4. Complete the following cash budget: February March Quarter January $ 6,000 64,000 70,000 Cash balance, beginning Add cash collections Total cash available Less cash disbursements: For inventory For operating expenses For equipment Total cash disbursements Excess (deficiency) of cash Financing 45,150 19,400 3.000 67,550 $ 2.450 Etc. 5. Prepare an absorption costing income statement, similar to the one shown in Chapter 8, for the quarter ended March 31 6. Prepare a balance sheet as of March 31