Required information [The following information applos to the questions dispilyed below] "Wo really need to get thls new material handing equipment in operation just affer the new year begins. 1 hope we can finance it largefy with cash and marketable securties, but if necessary we can get a short-term loan down at Metrobanke" This statement by Beth Davies-lowry. president of Inteccoastal Electronies Company, concluded a meeting she had caled with the fitri's top managemert thterceastal is a small., tapldy growing wholesalet of consumet electronic products. The firm's main product lnes are small kitehen appliances and power tools. Marcis Wicok, litercoestars Generail Monoger of Marketing, has recently completed a sales forecast, she believes the company's sales during the fint quater of 20x will increase by 10 porcent each month over the previous month's sales. Then Wilcor expects sases to remain constart for several months. Interconstars projected bainnce sheet as of December 31,20 a is as follows: Jack Hanson, the assistant controliec, is now preparing a monthiy budget for the frst quatter of 20xt. In the process, the following information has been accumulated: 1. Projected sales for December of 20NO are $500,000. Croait sales typicaly are 70 percent of total saies. Intercoastal's credit experience indicates that 20 percent of the credit sales are colected during the month of sale, and the remainder are collected during the following morth. 2. Interconstal's cost of goods sold generally runs of 70 peecent of sales. inventary is purchased on account, and 30 porcent of each month's purchases are peid during the month of purchase. The remainder is paid during the following month, In order to have adequate stocks of inventory on hand, the firm attempts to have inventory ot the end of each month equal to half of the next monthis projected cost of goods sold. 3. Hanson has estimated that intercoastal's other monthly expenses will be as follows: In addition, salos commissions run at the eate of 3 percent of sales. 4. Intercoastal's president, Davies Lowry, has indicated that the firm should invest 5105,000 in an automated inventory-handling system to control the movement of inventory in the lrre's warehouse just ofter the new year begins. These equipment purchases will be financed primarly from the firm's cash and marketable securties. However, Davies-Lowry bellewes that intercoastal noeds to keep a minimum cash balance of $40,000, If necessary, the remaindor of the equipment purchases will be financed using short-term credit from a local bank, The minimum period for such a loan is three montis. Hanson beleves shortterm interest rates will be 10 percent per year at the time of the equipment purchases. If o loan is necessary. Davies-Lowry has decided it should be paid off by the end of the first quarter if possbie. 5. Intercoastal's board of directors has indicated an intention to declare and pay didends of 575,000 on the last day of each quarter. 6. The interest on any short-term borrowing will be poid when the loan is repaid. Interest on thercoastarls bonds is paid semiannualy on January 31 and July 31 for the preceding sta-month period. 7. Propecty taxes are paid semiannuatly on Fobruary 28 and August 31 for the preceding six-month period. Required: Prepare Intercoastal Electronics Company's master budget for the first quarter of 201 by completing the following schedules and statements. 8. Prepare Intercoastal Electronics' budgeted statement of retained earnings for the first quarter of 20xL. Required: Prepare Intercoastal Electronics Company's master budget for the first quarter of 201 by completing the following schedules and statements. 9. Prepare Intercoastal Electronics' budgeted balance sheet as of March 31, 20x1. (Hint On March 31, 20x1, Bond Interest Payable is $3,300 and Property Taxes Payable is $1,200.) (Round your answers to the nearest whole dollar.)
