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 MetroBank. This statement by Beth Davies-Lowry, president of Intercoastal Electronics Company, concluded a meeting she had called with the firms top management. Intercoastal is a small, rapidly growing wholesaler of consumer electronic products. The firms main product lines are small kitchen appliances and power tools. Marcia Wilcox, Intercoastals General Manager of Marketing, has recently completed a sales forecast. She believes the companys sales during the first quarter of 20x1 will increase by 10 percent each month over the previous months sales. Then Wilcox expects sales to remain constant for several months. Intercoastals projected balance sheet as of December 31, 20x0, is as follows:

Cash	$	40,000
Accounts receivable		280,000
Marketable securities		20,000
Inventory		192,500
Buildings and equipment (net of accumulated depreciation)		544,000
Total assets	$	1,076,500
Accounts payable	$	257,250
Bond interest payable		3,750
Property taxes payable		3,600
Bonds payable (6%; due in 20x6)		150,000
Common stock		500,000
Retained earnings		161,900
Total liabilities and stockholders equity	$	1,076,500

Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of 20x1. In the process, the following information has been accumulated:

Projected sales for December of 20x0 are $500,000. Credit sales typically are 70 percent of total sales. Intercoastals 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.

Intercoastals cost of goods sold generally runs at 70 percent of sales. Inventory is purchased on account, and 30 percent of each months 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 months projected cost of goods sold.

Hanson has estimated that Intercoastals other monthly expenses will be as follows:

Sales salaries	$	30,000
Advertising and promotion		20,000
Administrative salaries		30,000
Depreciation		20,000
Interest on bonds		750
Property taxes		900

In addition, sales commissions run at the rate of 1 percent of sales.

Intercoastals president, Davies-Lowry, has indicated that the firm should invest $125,000 in an automated inventory-handling system to control the movement of inventory in the firms warehouse just after the new year begins. These equipment purchases will be financed primarily from the firms cash and marketable securities. However, Davies-Lowry believes that Intercoastal needs to keep a minimum cash balance of $25,000. 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. Hanson 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.

Intercoastals board of directors has indicated an intention to declare and pay dividends of $50,000 on the last day of each quarter.

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

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

Required: Prepare Intercoastal Electronics Companys master budget for the first quarter of 20x1 by completing the following schedules and statements.

Required Infarmation [The following infommetion applies to the questions displayed below.] We reslly need to get this new materialhanding equlpment in operation just after the new yesr begina. I hope we can fingene it lergely wth cesh snd marketable securties, but If necessary we can get a shortterm loen dawn at MetroBsnk" This ststement by Beth Dovies-Lowry, president of lntercosstsi Electronles Compony, conduded a meeting she had coled with the firm's top msnsgement lntercosstal is s smell, rapidly growing wholessler of consumer eiectranic products. The firm's main product Ines are amsill kitzhen applances and power tools. Morcis Wilcox, Intercosstal's General Mansger of Marketing, hss recently completed a ssies forecsat. She beleves the compsny's sales during the first quarter of 201 wi. incresse by 10 percent esch month over the previaus month's sales. Then Wlikexpects ssles to remain constont for seversl months. Intercossta's projected bslsnce sheet os of December 31, 20x0, is ss fol awi Jock Hanson, the sssistant controller, ls now prepsring a monthly budget for the first quarter of 20x. In the process, the following information hea been occumulated: 1. Projected ssles for December af 200 sre $500,000. Creotsoles typicaly sre 70 percent of totsl ssies. Intercosstal's credit experience indicates that 20 percent of the credit ssies are collected during the month of asle, and the remainder are collected during the folowing month. 2. Intercosstal's cost of good: so d generaly runs at 70 percent of ssies. Inventary ls purchased an account, and 30 percent of esch month's purchsses are poid during the month of purchsse. The remender ls psid during the fallowng month. In order to have sdequste stacks of Inventary an hand, the firm sttempts to hsve inventory st the end of esch month equal to half of the next month's projected cast of good: sold. 3. Henzan his estimsted that Intercoestal's other monthly expenses will be ss folowz:- In solation, ssles commisians run st the rate of 1 percent of ssles. 4. Intercosstal's president, Davies-Lowry, has indicated that the firm should invest $125,000 in an outometed Inventoryhondling syatem to contral the movement of inventory in the firm's warehouse just after the new yesr beging. These equlpment purcheses will be financed primarly from the firm's cssh end marketsble securtites. However, Dsvies-Lowry be eves thst litercosstal needs to keep a minimum cash bolance of $25,000. If necesssry, the remsinder of the equipment purcheses will be financed using shortterm creditfrom s locsl bank. The minimum period for zuch olosn is three manths. Hanson believes shart-term interest rotes will be 10 percent per year at the time af the equlpment purchases. If s loan is necessary, Devies-Lowry hes decided it should be poid off by the end of the first cusiter If posalble. 5. Intercosstol's bosrd of directors hes indicsted sn intention to declsre and poy dividends of $50,000 on the lsst dsy of esch qusrter. 6. The interest on any shortterm borrowing wil be psid when the losn is repaid. Interest an Intercosstais bonds is psid semiannusly on Janusry 31 and July 31 for the preceding slx-manth perlod. 7. Prope ty tsxes are paid semiannusly on Februsry 29 and August 31 far the preceding sxemonth periad. Required: Prepsre lntercosstal Eectronics Compony's msster budget far the first qusiter of 201 by completing the following schedule: end statements. 9. Prepsre Intercosstsl E ectronics' budgeted bslsnce sheet es of Msreh 31, 20xt. (Hint: On Morch 51, 20x1, Bond Interest Poysble is $1,500 and Property Towes Psyeble is $900.1 (Round your answers to the nearest whole dollor.)