Scenario: Oriental Company, an office supplies specialty store. prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the Master Budget for the first quarter: a. As a December 31, ( the end of the prior quarter), the company's general ledger showed the following account balances: Debit Credit Cash Accounts receivable Inventory $48,000 224,000 60,000 Buildings and equipment, net 370,000 Accounts payable Capital stock Retained earnings $93,000 500,000 109,000 b. Actual sales for December and budgeted sales for the next four (4) months are as follows: December (actual) $280,000 January 400,000 February 600,000 March 300,000 April 200,000 c. Sales are 30% for Cash and 70% on credit. All payments on credit sales are collected in the month following sale. The account receivable at December 31 are a result of December credit sales. d. The company's gross margin is 45% of sales. In other words, cost of goods sold is 55% of sales c. Monthly expenses are budgeted as follows: -Salaries and wages, $ 29,000 per month -Advertising, 75,000 per month -Shipping, 6% of sales -Other expenses, 4% of sales -Depreciation, including depreciation on new assets acquired during the quarter, will be $46,000 for the quarter. f. Each month's ending inventory should equal 30% of the following month's cost of goods sold g. 60% of a month's inventory purchases is paid for in the month of purchase: the other part is paid in the following month. h. During February, the company will purchase a new cost machine for $2,000 cash. During march, other equipment will be purchase for cash at a cost of $85,000 i. During January, the company will declare and pay $47,000 in cash dividends. j. Management wants to maintain a minimum cash balance of $32,000. 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. 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, complete the following statements and schedules for the first quarter: 1. Schedule of expected cash collections: January February March Quarter Cash sales S Credit sales Total 5 5 5 2 A. Merchandise purchases budget: January February March Quarter Budgeted cost S of goods sold +desired end inventory Total needs Less beg inventory Req purchases S B Schedule of expected cash disbursements for merchandise purchases January February March Quarter December $93,000 purchase January purchase February purchase March purchases Total cash S disbursements 3. Schedule of expected cash disbursements for selling and administrative expenses: Salaries/wages Advertising Shipping Other expenses Total cash disbursements January February March Quarter 4.CASH BUDGET JANUARY FEBRUAR MARCH QUARTE R Y 548,000 5 Cash balance + cash collections =Total Cash available Less: Cash Disbursements: Inventory Selling/administrative expenses Purchases of equipment -Cash dividends Total cash disbursements S Excess (deficiency) of cash 5 Financing