The Goldberg Tire Company manufactures racing tires for bicycles. Goldberg sells tires for $75 each. Goldberg's balance sheet for December 2020 follows:

Other data for Goldberg Tire Company:

a. Budgeted sales are 1,300 tires for the first quarter and expected to increase by 200 tires per quarter. Cash sales are expected

to be 30% of total sales, with the remaining 70% of sales on account.

b. Finished Goods Inventory on December 31, 2020 consists of 300 tires at $28 each.

c. Desired ending Finished Goods Inventory is 20% of the next quarter's sales; first quarter sales for 2026 are expected be

2,100 tires. FIFO inventory costing method is used.

d. Raw Materials Inventory on December 31, 2020, consists of 600 pounds of rubber compound used to manufacture the tires.

e. Direct materials requirements are two pounds of a rubber compound per tire. The cost of the compound is $4.00 per pound.

f. Desired ending Raw Materials Inventory is 40% of the next quarter's direct materials needed for production; desired ending

inventory for December 31, 2021 is 600 pounds; indirect materials are insignificant and not considered for budgeting

purposes.

g. Each tire requires 0.50 hours of direct labor; direct labor costs average $25 per hour.

h. Variable manufacturing overhead is $2 per tire.

i. Fixed manufacturing overhead includes $3,500 per quarter in depreciation and $12,800 per quarter for other costs, such as

utilities, insurance, and property taxes.

j. Fixed selling and administrative expenses include $8,500 per quarter for salaries; $5,700 per quarter for rent; $1,200 per

quarter for insurance; and $500 per quarter for depreciation.

k. Variable selling and administrative expenses include supplies at 1% of sales.

l. Capital expenditures include $45,000 for new manufacturing equipment, to be purchased and paid in the first quarter.

m. Cash receipts for sales on account are 80% in the quarter of the sale and 20% in the quarter following the sale; December 31,

2020, Accounts Receivable is received in the first quarter of 2021; uncollectible accounts are considered insignificant and not

considered for budgeting purposes.

n. Direct materials purchases are paid 90% in the quarter purchased and 10% in the following quarter; December 31, 2020,

Accounts Payable is paid in the first quarter of 2021.

o. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.

p. Income tax expense is projected at $4,000 per quarter and is paid in the quarter incurred.

q. Goldberg desires to maintain a minimum cash balance of $50,000 and borrows from the local bank as needed in increments

of $1,000 at the beginning of the quarter; principal repayments are made at the beginning of the quarter when excess funds

are available and in increments of $1,000; interest is 5% per year and paid at the beginning of the quarter based on the

amount outstanding from the previous quarter.

Requirements:

1.Prepare

Goldberg's

operating budget and cash budget for

2021

by quarter. Required schedules and budgets include: sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, cost of goods sold budget, selling and administrative expense budget, schedule of cash receipts, schedule of cash payments, and cash budget. Manufacturing overhead costs are allocated based on direct labor hours. Round all calculations to the nearest dollar.

2.

Prepare

Goldberg's

annual financial budget for

2021,

including budgeted income statement and budgeted balance sheet.

Assets Current Assets: Cash $ 54.000 Accounts Receivable 50,000 Raw Materials Inventory 2,400 Finished Goods Inventory 8,400 Total Current Assets $ 114,800 Property, Plant, and Equipment: Equipment 139,000 Less: Accumulated Depreciation (106,000) 33,000 Total Assets $ 147,800 Liabilities Current Liabilities: Accounts Payable $ 16,000 Stockholders' Equity Common Stock, no par $ 110,000 21,800 Retained Earnings 131,800 Total Stockholders' Equity $ 147,800 Total Liabilities and Stockholders' Equity