Sweet Company, a specialty chocolate store, prepares a master budget on a quarterly basis. The company has assembled the following data to assist in preparing its master budget for the first quarter:

a. As of December 31 (the end of the prior quarter), the companys general ledger showed the following account balances:

	Debits	Credits
Cash	$ 50,000
Accounts Receivable	162,500
Inventory	58,000
Buildings and Equipment (net)	370,000
Accounts Payable		$ 65,000
Capital Stock		412,500
Retained Earnings		163,000
	$640,500	$640,500

b. Actual sales for November and December, along with budgeted sales for the next four months, are as follows:

November (actual)	$250,000
December (actual)	$300,000
January	$300,000
February	$650,000
March	$350,000
April	$200,000

c. Sales are 50% for cash sales and 50% for credit sales. Credit sales are collected in the two months following the sale: 90% the month after the sale, 10% two months after the sale. The accounts receivable at December 31 are a result of November and December credit sales.

d. The companys gross margin is 45% of sales. (In other words, cost of goods sold is 55% of sales.)

e. Monthly salary and wage expenses are budgeted as follows: salaries and wages, $27,000 per month for the first two months, $26,000 in March as Sweet cuts the hours of its sales force to reflect declining sales.

f. Other monthly expenses are as follows: advertising $80,000 per month; shipping cost is 5% of total monthly sales revenues, and other expenses are 3% of sales revenues. Depreciation, including depreciation on new assets acquired during the quarter, will be $40,000 for the quarter.

g. Each months ending inventory should equal 10% of the following months cost of goods sold.

h. One-half of a months inventory purchases are paid for in the month of purchase; the other half is paid in the following month.

i. During January, the company will purchase a new copy machine for $2,000 cash. During March, other equipment will be purchased for cash at a cost of $79,500.

j. During January, the company will declare and pay $38,000 in cash dividends.

k. The company must maintain a minimum cash balance of $40,000. An open line of credit is available at a local bank for any borrowing that may be needed during the quarter. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. Borrowings and repayments of principal must be in multiples of $1,000. Interest is paid only at the time of payment of principal. The annual interest rate is 6%. (Figure interest on whole months, e.g., 2/12, 3/12.)

l. The company does not pay any income taxes.

Required:

Using the data above, complete the following statements and schedules for the first quarter:

5. Cash budget:

	January	February	March	Quarter
Cash balance, beginning	$50,000
Add cash collections	297,500
Total cash available	347,500
Less cash disbursements:
Purchases of inventory	136,375
Selling and administrative expenses	131,000
Purchases of equipment
Cash dividends
Total cash disbursements
Excess (deficiency) of cash
Financing:
Borrowings
Repayments
Interest
Total Financing
Cash Balance, ending