Question
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
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 short term loan down at Metro bank. This Statement by Beth Davies Lowry president of Global Electronics Company, concluded a meeting she had called with the firm s top management. Global is a small, rapidly growing wholesaler of consumer electronic products. The firms main product lines are small kitchen appliances and power tools. Maria Wilcox, Global Electronics general manager of marketing has recently completed a sales forecast. She believes the companys sales during the first quarter of 2021 will increase by 10% each month over the previous month s sales. Than Wilcox expects sales to remain constant for several months. Global s projected balance sheet as of Dec 31 2020 is as follow:
Cash 70,000
A/c receivable 540,000
Marketable securities 30,000
Inventory 308,000
Building and equipment (net of accumulated depreciation) 1,252,000
Total assets 2,200,000
A/c payable 352,800
Bonds interest payable 25,000
Property tax payable 7,200
Bonds Payable ( 10% due in 2026 ) 600,000
Common stock 1,000,000
Retained earnings 215,000
Total liabilities and stockholders equity 2,200,000
Jack Hanson the assistant controller is the preparing a monthly budget for the first quarter of 2021. In the process the following information has been accumulated
Sales salaries 42,000
Advertising and promotion 32,000
Administrative salaries 42,000
Depreciation50,000
Interest on bonds 5,000
Property taxes 1,800
In addition, sales commission run at the rate of 1% of sales.
Required: Prepare Global Electronics Company s masterbudget for the first quarter 2021 by completing the following schedules and statements.
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