$"$We really need to get this new material$-$handling equipment in operation just after the new year begins. I hope we can finance it largely with cash and marketable securities$,$ but if necessary we can get a shortterm loan down at MetroBank." This statement by Beth Davies$-$Lowry, president of Intercoastal Electronics Company, concluded a meeting she had called with the firm's top management. Intercoastal is a small, rapidly growing wholesaler of consumer electronic products. The firm's main product lines are small kitchen appliances and power tools. Marcia Polosky, Intercoastal's General Manager of Marketing, has recently completed a sales forecast. She believes the company's sales during the first quarter of $\backslash (20\backslash$times $1\backslash )$ will increase by $10$ percent each month over the previous month's sales. Then Polosky expects sales to remain constant for several months. Intercoastal's projected balance sheet as of December $31,20$x$0,$ is as follows:

Joaquin Rafael, the assistant controller, is now preparing a monthly budget for the first quarter of $\backslash (20\backslash$times $1\backslash ).$ In the process, the following information has been accumulated:

$1.$ Projected sales for December of $\backslash (20\backslash$times $0\backslash )$ are $\backslash (\backslash$$ $400,000\backslash ).$ Credit sales typically are $70$ percent of total sales. Intercoastal's credit experience indicates that $20$ percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month.

$2.$ Intercoastal's cost of goods sold generally runs at $70$ percent of sales. Inventory is purchased on account, and $30$ percent of each month's purchases are paid during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to have inventory at the end of each month equal to half of the next month's projected cost of goods sold.

$3.$ Rafael has estimated that Intercoastal's other monthly expenses will be as follows:

In addition, sales commissions run at the rate of $2$ percent of sales.

$4.$ Intercoastal's president, Davies$-$Lowry, has indicated that the firm should invest $\backslash (\backslash$$ $120,000\backslash )$ in an automated inventory$-$handling system to control the movement of inventory in the firm's warehouse just after the new year begins. These equipment purchases will be financed primarily from the firm's cash and marketable securities$.$ However, Davies$-$Lowry believes that Intercoastal needs to keep a minimum cash balance of $\backslash (\backslash$$ $20,000\backslash ).$ If necessary, the remainder of the equipment purchases will be financed using short$-$term credit from a local bank. The minimum period for such a loan is three months. Rafael believes short$-$term interest rates will be $10$ percent per year at the time of the equipment purchases. If a loan is necessary, Davies$-$Lowry has decided it should be paid off by the end of the first quarter if possible.

$5.$ Intercoastal's board of directors has indicated an intention to declare and pay dividends of $\backslash$$$30,000$ on the last day of each quarter.

$6.$ The interest on any short$-$term borrowing will be paid when the loan is repaid. Interest on Intercoastal's bonds is paid semiannually on January $31$ and July $31$ for the preceding six$-$month period.

$7.$ Property taxes are paid semiannually on February $28$ and August $31$ for the preceding six$-$month period.

Required:

Prepare Intercoastal Electronics Company's master budget for the first quarter of $20$x$1$ by completing the following schedules and statements. $1.$ Sales budget:

Answer is complete and correct.

$\backslash$begin$\{$tabular$\}\{|$l$|$c$|$c$|$c$|$c$|$c$|$c$|\}$

$\backslash$hline & $\backslash$multicolumn$\{2\}\{|$c$|\}\{\backslash (\backslash$mathbf$\{20$ x $0\}\backslash )\}$ & $\backslash$multicolumn$\{4\}\{$c$|\}\{20$x$1\}\backslash \backslash$

$\backslash$cline $\{2-8\}$ & December & January & February & March & $\backslash$begin$\{$tabular$\}\{$c$\}$

First $\backslash \backslash$

Quarter

$\backslash$end$\{$tabular$\}\backslash \backslash$

$\backslash$hline Total sales & $\backslash (\backslash$$ $400,000\backslash )$ & $\backslash (\backslash$$ $440,000\backslash )$ & $\backslash (\backslash$$ $484,000\backslash )$ & $\backslash (\backslash$$ $532,400\backslash )$ & $\backslash (\backslash$$ $1,456,400\backslash )\backslash \backslash$

$\backslash$hline Cash sales & $120,000$ & $132,000$ & $145,200$ & $159,720$ & $436,920\backslash \backslash$

$\backslash$hline Sales on account & $280,000$ & $308,000$ & $338,800$ & $372,680$ & $\backslash (1,019,480\backslash )\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$

$2.$ Cash receipts budget:

Answer is complete and correct.

$3.$ Purchases budget:

Answer is complete and correct.

$4.$ Cash disbursements budget:

Note: Round your inventory purchases up to the nearest whole dollar.

Answer is not complete.

$\backslash$begin$\{$tabular$\}\{|$c$|$c$|$c$|$c$|$c$|$c$|$c$|$c$|$c$|\}$

$\backslash$hline $\backslash$multirow$[$t$]\{2\}\{*\}\{\}$ & $\backslash$multicolumn$\{8\}\{|$c$|\}\{20$x$1\}\backslash \backslash$

$\backslash$hline & $\backslash$multicolumn$\{2\}\{|$r$|\}\{$January$\}$ & $\backslash$multicolumn$\{2\}\{|$r$|\}\{$February$\}$ & $\backslash$multicolumn$\{2\}\{|$r$|\}\{$March$\}$ & $\backslash$multicolumn$\{2\}\{|$r$|\}\{$First Quarter$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{9\}\{|$l$|\}\{$Inventory purchases:$\}\backslash \backslash$

$\backslash$hline Cash payments for purchases during the current month & $\backslash$$ & $97,020$ & $\backslash$$ & $106,722$ & $\backslash$$ & $111,804$ & $\backslash$$ & $315,546\backslash \backslash$

$\backslash$hline Cash payments for purchases during the preceding month & & & & $226,380$ & & & & $\backslash \backslash$

$\backslash$hline Total cash payments for inventory purchases & $\backslash$$ & $97,020$ & $\backslash$$ & $333,102$ & $\backslash$$ & $111,804$ & $\backslash$$ & $315,546\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{9\}\{|$l$|\}\{$Other expenses:$\}\backslash \backslash$

$\backslash$hline Sales salaries & $\backslash$$ & $28,000$ & $\backslash$$ & $28,000$ & $\backslash$$ & $28,000$ & $\backslash$$ $5.$ Complete the first three lines of the summary cash budget. Then do the analysis of short$-$term financing needs in requirement $6.$ Then finish requirement $5.$

$\backslash$begin$\{$tabular$\}\{|$c$|$c$|$c$|$c$|$c$|\}$

$\backslash$hline & $\backslash$multicolumn$\{4\}\{|$c$|\}\{20$x$1\}\backslash \backslash$

$\backslash$hline & January & February & March & First Quarter $\backslash \backslash$

$\backslash$hline Cash receipts $($from part $2)$ & & & & $\backslash \backslash$

$\backslash$hline Less: Cash disbursements $($from part $4)$ & & & & $\backslash \backslash$

$\backslash$hl $8.$ Prepare Intercoastal Elect