Watson Leisure Time Sporting Goods manufactures golf clubs, baseball bats, basketball goals, and other similar items. The companys income statements for the past three years are indicated in Exhibit 1. The balance Sheets for the same period are shown in Exhibit 2. Exhibit 1 WATSON LEISURE TIME SPORTING GOODS Income Statement 2017 2018 2019 Sales (all on credit) $1,500,000 $1,800,000 $2,160,000 Cost of goods sold 950,000 1,120,000 1,300,000 Gross profit 550,000 680,000 860,000 Selling and administrative expense 380,000 490,000 590,000 Operating profit 170,000 190,000 270,000 Interest expense..... 30,000 40,000 85,000 Net income before taxes 140,000 150,000 185,000 Taxes 46,120 48,720 64,850 Net Income.. $93,880 $101,280 $120,150 Shares 40,000 40,000 46,000 WATSON LEISURE TIME SPORTING GOODS has made the following projections 2020. All sales are on credit March $24,000 June $28,000 April 16,000 July 35,000 May 18,000 August 38,000 Sales in January and February were $27,000 and $26,000, respectively. Experience has shown that of total sales, 40 percent are collected in the month of sale, 40 percent are collected in the following month, and 20 percent are collected two months after sale. Total annual sales for the year 2020 are forecasted to be $2,500,000. Monthly material purchases are set equal to 20 percent of forecasted sales for the next month. Of the total material costs, 40 percent are paid in the month of purchase and 60 percent in the following month. Labour costs will run $6,000 per month, and fixed overheads is $3,000 per month. Interest payments on the debt will be $4,500 for both March and June. Finally, Watsons sales force will receive a 3 percent commission on total sales for the first six months of the year, to be paid on June 30. A cash dividend of $20,000 is scheduled to be paid in September. Tax payments of $3,500 are due in June and September. 2 Exhibit 2 WATSON LEISURE TIME SPORTING GOODS Balance Sheet Assets 2017 2018 2019 Cash $20,000 $30,000 $20,000 Marketable securities 30,000 35,000 50,000 Accounts receivable 150,000 230,000 330,000 Inventory 250,000 285,000 325,000 Total Current Assets 450,000 580,000 725,000 Net Plant and equipment 550,000 720,000 1,169,000 Total Assets.. $1,000,000 $1,300,000 $1,894,000 Liabilities & Equity Accounts payable. $100,000 $225,000 $200,000 Notes payable (bank) 100,000 100,000 300,000 Total Current liabilities 200,000 325,000 500,000 Long-term liabilities 250,000 331,120 550,740 Total liabilities 450,000 656,120 1,050,740 Common stock ($10 par) 400,000 400,000 460,000 Capital paid in excess of par. 50,000 50,000 80,000 Retained earnings 100,000 193,880 303,260 Total stockholders equity.. 550,000 643,880 843,260 Total liabilities and stockholdersequity $1,000,000 $1,300,000 $1,894,000 WATSON LEISURE TIME SPORTING GOODS is trying to decide between two potential small shopping centre purchases. Their choices are the Wrigley Village and Croxley Square. The anticipated annual cash inflows for 2021 from each are as follows: Wrigley Village Croxley Square Yearly aftertax cash inflow (in thousands) Probability Yearly aftertax cash inflow (in thousands) Probability $10 0.1 $20 0.1 30 0.2 30 0.3 40 0.3 35 0.4 50 0.3 50 0.2 60 0.1 Required: Prepare a schedule of monthly cash receipts, monthly cash payments and a complete monthly budget for March through June for Watson Company. (30 marks)