Question 2: Mahendra Toys is a wholesale distributor of gifts and accessories. The following data relates to their balance sheet as of 31 December 2020. Current Assets Cash Accounts Receivable Inventory Building and equipment, Net* Total Assets Current Liabilities Accounts Payable Common Shares Retained Earnings Total Liabilities & Owner's Equity $ 8,000 $ 42,000 $ 10,200 $136,000 $196,200 $ 30,200 $120,000 $ 46,000 $196,200 a. The gross margin for the company is 30% of sales. b. Actual and budgeted sales data are as follows - January February March April $75,000 $85,000 $95,000 $70,000 C. Sales are 20% in cash and 80% in credit. Credit sales are collected in the month following the sale. d. Each month's ending inventory should be 20% of the following month's budgeted cost of goods sold. e. 30% of the month's inventory purchases are paid for in the month of purchase; the remaining 70% is paid for in the following month. f. Monthly expenses are as follows: salaries, $10,000; rent, $6,000; advertisements, $2,000; other expenses (excluding depreciation), 15% of sales. Depreciation is $4,000 for the quarter and includes depreciation on new assets acquired during the quarter. g. Equipment will be acquired for cash: $6,000 in January and $8,000 in March. h. Management would like to maintain a minimum cash balance of $6,000 at the end of each month. Assume the company can borrow at 0% interest and they do not pay any income tax. All borrowing occurs at the beginning of a month. The company will, as far as it is able, repay outstanding loans at the end of each month 1. Prepare the following budgets for each of the first three months of 2021. [15 Marks] Schedule of Expected Cash Collection Merchandise Purchase Budget Schedule of Cash Disbursement for Purchase Schedule of Cash Disbursement for S & A expenses Cash Budget 2. Prepare a budgeted income statement for the first three months of 2021 and a budgeted balance sheet as of March 31, 2021 [ 7 Marks]