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 Global Electronics Company, concluded a meeting she had called with the firms 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. Marcia Wilcox, Global Electronics 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. Globals projected balance sheet as of December 31, 20x0 is as follows:

Cash

$

55,000

Accounts receivable

360,000

Marketable securities

25,000

Inventory

192,500

Buildings and equipment (net of accumulated depreciation)

546,000

Total assets

$

1,178,500

Accounts payable

$

220,500

Bond interest payable

6,250

Property taxes payable

3,600

Bonds payable (10%; due in 20x6)

150,000

Common stock

500,000

Retained earnings

298,150

Total liabilities and stockholders equity

$

1,178,500

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:

1.	Projected sales for December of 20x0 are $500,000. Credit sales typically are 80 percent of total sales. Globals credit experience indicates that 10 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month.
2.	Global Electronics cost of goods sold generally runs at 70 percent of sales. Inventory is purchased on account, and 40 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.
3.	Hanson has estimated that Globals other monthly expenses will be as follows:

Sales salaries$30,000

Advertising and promotion 16,000

Administrative salaries 30,000

Depreciation 30,000

Interest on bonds 1,250

Property taxes 900

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

4.	Global Electronics president, Davies-Lowry, has indicated that the firm should invest $115,000 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 the company needs to keep a minimum cash balance of $50,000. 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.
5.	Global Electronics board of directors has indicated an intention to declare and pay dividends of $50,000 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 Global Electronics 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 Global Electronics Companys master budget for the first quarter of 20x1 by completing the following schedules and statements.

1.	Sales budget:

	20x0	20x1	20x1	20x1	20x1
	December	January	Febuary	March	1st Quarter
Total sales	???	???	???	???	???
Cash sales	???	???	???	???	???
Sales on account	???	???	???	???	???

2. Cash Reciepts Budget:

	20x1	20x1	20x1	20x1
	January	Febuary	march	1st Quarter
Cash Sales	?	?	?	?
Cash collection from credit sales during current month	?	?	?	?
Cash collection from credit sales during previous month	?	?	?	?
Total cash reciepts	?	?	?	?

3. Purchases Budget

	20x0	20x1	20x1	20x1	20x1
	December	January	Febuary	March	1st Quarter
Budgeted cost of goods sold
Add: desired ending inventory
total goods needed
Less: expected beginning inventory
Purchases

4. Cash Disbursements Budget

	20x1	20x1	20x1	20x1
	January	Febuary	March	1st Quarter
Inventory purchases:	?	?	?	?
Cash payments for purchases during the current month	?	?	?	?
Cash payments for purchases during the preceding month	?	?	?	?
total cash payments for inventory purchases	?	?	?	?
other expences:	?	?	?	?
sales salaries	?	?	?	?
advertising and promotion	?	?	?	?
admistrative salaries	?	?	?	?
interest on bonds	?	?	?	?
property taxes	?	?	?	?
sales commissions	?	?	?	?
total cash payments for other expenses	?	?	?	?
total cash disbursements	?	?	?	?