Required Information The following Information applies to the questions displayed below We really need to get this new materlal-handling equipment In operation Just after the new year begins. I hope we can finance t largely with cash and marketable securities, but If necessary we can get a short-term loan down at MetroBank This statement by Beth Davles-Lowry. presldent of Intercoastal Electroncs Company, concluded a meeting she had called with the firm's top management. Intercoastal Is a small, rapldly growing wholesaler of consumer electronic products. The firm's maln product lines are small kitchen appliances and power tools. Marcla Wlcox, Intercoastal's General Manager of Marketing, has recently completed a sales forecast. She belleves the company's sales during the first quarter of 20x1 will Increase by 10 percent each month over the previous month's sales. Then Wlcox expects sales to remain constant for several months. Intercoastal's projected balance sheet as of December 31, 20x0, Is as follows: Cash Accounts receivable Narketable securities Invento 5 55,ee 243,889 28.803 138,68e 541,60e ry 5 997,6ee Total assets Accounts payable Bond interest payable Property taxes payable Bonds payable (18%; due in 28x6) Common stock S 153,76e 5,983 3.60e 128,63e 500,6ee 219,24e Total liabilities and stockholders equity 5 997,6ee Jack Hanson, the assistant controller, Is now preparing a monthly budget for the first quarter of 20x1. In the process, the following Information has been accumulated 1. Projected sales for December of 20x0 are $360.000. Credit sales typically are 75 percent of total sales. Intercoastal's credit experience Indicates that 10 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month. 2 Intercoastal's cost of goods sold generally runs at 70 percent of sales. Inventory is purchased on account, and 40 percent of each month's purchases are pald during the month of purchase. The remalnder Is pald during the following month. In order to have adequate stocks of Inventory on hand, the firm attempts to have Inventory at the end of each month equal to half of the next month's projected cost of goods sold. 3. Hanson has estimated that Intercoastal's other monthly expenses will be as follows: Sales salarie: 5 28,88e 16,800 28.803 25,88 Interest on bonds Property taxes 1,883 In addition, sales commissions run at the rate of 1 percent of sales. 4. Intercoastal's president, Davles-Lowry, has Indicated that the firm should Invest $110,000 In an automated Inventory- handling system to control the movement of Inventory In the firm's warehouse Just after the new year begins. These equipment purchases will be financed primarlly from the firm 's cash and marketable securities. However, Davles-Lowry belleves that Intercoastal needs to keep a minimum cash balance of $25,000. If necessary, the remalnder of the equipment purchases will be financed using short-term credit from a local bank. The minlmum perlod for such a loan Is three months. Hanson belleves short-term Interest rates will be 10 percent per year at the time of the equlpment purchases. If a loan Is necessary, Davles-Lowry has decided It should be pald off by the end of the first quarter if possible. 5. Intercoastal's board of directors has Indicated an Intention to declare and pay divMdends of $50,000 on the last day of 6. The Interest on any short-term borrowng will be pald when the loan is repald. Interest on Intercoastal's bonds Is pald 7. Property taxes are pald semlannually on February 28 and August 31 for the preceding slx-month period. each quarter semlannually on January 31 and July 31 for the preceding six-month period. Required: Prepare Intercoastal Electronics Company's master budget for the first quarter of 20x1 by completing the followlng schedules and statements. 1. Sales budget 20x0 20x1 December January FebruaryM March First Quarter r Total sales Cash sales Sales on account 2 Cash receipts budget 20x1 January February March First Quarter Cash sales Cash collections from credit sales made during current month Cash collections from credit sales made during preceding month Total cash receipts 3. Purchases budget 20x0 20x1 December January February March First Quarter Budgeted cost of goods sold Add: Desired ending inventory Total goods needed Less: Expected beginning inventory Purchases 4. Cash disbursements budget 20x1 January February March First Quarter Inventory purchases Cash payments for purchases during the current month Cash payments for purchases during the preceding month Total cash payments for inventory purchases Other expenses: Sales salaries Advertising and promotion Administrative salaries Interest on bonds Property taxes Sales commissions Total cash payments for other expenses Total cash disbursements 5. Complete the first three lines of the summary cash budget. Then do the analysls of short-term financing needs in requirement (6) Then finish requirement (5). 20x1 January February March First Quarter Cash receipts (from part 2) Less: Cash disbursements (from part 4) Change in cash balance during period due to operations Sale of marketable securities (1/2/x1) Proceeds from bank loan (1/2/x1) Purchase of equipment Repayment of bank loan (3/31/x1) Interest on bank loan Payment of dividends Change in cash balance during first quarter Cash balance, 1/1x1 Cash balance, 3/31x 6. Calculation of required short-term borrowing. Projected cash baance as of December 31, 20x0 Less: Minimum cash balance Cash avalable for equipment purchases Projected proceeds from sale of marketable securities Cash avalable Less: Cost of investment in equipment Required short-term borrowing 7. Prepare Intercoastal Electronics' budgeted income statement for the first quarter of 20x1. (lgnore Income taxes) INTERCOASTAL ELECTRONICS COMPANY Budgeted Income Statement For the First Quarter of 20x1 Sales revenue Cost of goods sold Gross margin Selling and administrative expenses Sales salaries Sales commissions Advertising and promotion Administrative salaries Depreciation Interest on bonds Property taXes Interest on short-term bank loan Total selling and administrative expenses et income 8. Prepare Intercoastal Electronics' budgeted statement of retalned eamings for the first quarter of 20x1. INTERCOASTAL ELECTRONICS COMPANY Budgeted Statement of Retained Earnings For the First Quarter of 20x1 Retained earnings, 12/31/x Add: Net income Less: Dividends Retained earnings, 3/31x1 9. Prepare Intercoastal Electronics' budgeted balance sheet as of March 31, 20x1. (Hint: On March 31, 20x1, Bond Interest Payable Is $2000 and Property Taxes Payable is $900.) INTERCOASTAL ELECTRONICS COMPANY Budgeted Balance Sheet March 31, 20x1 Total assets Total liabilities and stockholders equity0