The following data relate to Carson Supply, a distributor of valves.

Current AssetsDecember 31

Cash $6,000

Accounts Receivable $36,000

Inventory $9,800

Buildings & equipment, net $110,885

Accounts Payable $32,550

Capital Stock $100,000

Retained Earnings $30,135

(a) Gross Margin is 30% of sales (thus, cost of goods sold is 70% of sales);

(b) Actual and budgeted sales data are:

December (actual) $60,000

January (budgeted) $70,000

February (budgeted) $80,000

March (budgeted) $85,000

April (budgeted) $55,000

(c) Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following the sale. Accounts Receivables at December 3 are the result of December credit sales;

(d) Each months ending inventory should equal 20% of the following months budgeted cost of goods sold;

(e) One quarter of a months inventory purchase is paid for in the month of purchasethe other three quarters of the months inventory is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory;

(f) Monthly expenses are: commissions ---$12,000: rent---$1,800: other expenses (excluding depreciation)---8% of sales. Assume that these expenses are paid monthly: Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter;

(g) Equipment will be acquired for cash: $3,000 in January and $8,000 in February;

(h) Management would like to maintain a minimum cash balance of $5,000 at the end of each month. Carson Supply has an agreement with a local bank that allows the Company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month. For simplicity assume that interest is not compounded. Carson Supply would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter,

Required: Using the preceding data:

a. Complete the following schedule:

Schedule of Expected Cash Collections

b. Complete the following:

Merchandise Purchases Budget

c. Schedule of Expected Cash DisbursementsMerchandise Purchases

d. Complete the following schedule

Schedule of Expected Cash Disbursements ---Selling and Administrative Expenses

e. Complete the following cash budget

Cash Budget

* $3,000 x 1% x 3 = $90 $6,000 x 1% x 2 = 120 Total interest = $90 + $120 = $210

f. Prepare an adsorption costing income statement, similar to the one shown in Schedule 9 (pages 389-390 of Chapter 9Profit Planning) for the quarter ended March 31

g. Prepare a balance sheet for the quarter ended March 31