Xx) P22-41A (similar to) The Goldman Tire Company manufactures racing tires for bicycles. Goldman sells tires for $80 each. Goldman is planning for the next year by developing a master budget by quarters. Goldman's balance sheet for December 31, 2018, follows: (Click the icon to view the balance sheet.) Goldman Tire Company Balance Sheet December 31, 2018 Assets Current Assets: Cash 39,000 Accounts Receivable 50,000 Raw Materials Inventory 10,800 21,000 Finished Goods Inventory Total Current Assets $ 120,800 Property, Plant, and Equipment: Property, Plant, and Equipment: Equipment 139,000 (83,000) Less: Accumulated Depreciation 56,000 $ 176,800 Total Assets Liabilities Current Liabilities: Accounts Payable 14,000 Stockholders' Equity Common Stock, no par $ 160,000 2,800 Retained Earnings Total Stockholders' Equity 162,800 (Unless otherwise noted, assume all of the following events occurred during 2018 and that any balances given are stated as of December 31, 2018.) a. Budgeted sales are 1,700 tires for the first quarter and expected to increase by 100 tires per quarter. Cash sales are expected to be 30% of total sales, with the remaining 70% of sales on account. b. Finished Goods Inventory on December 31, 2018 consists of 600 tires at $35 each. c. Desired ending Finished Goods Inventory is 40% of the next quarter's sales; first quarter sales for 2020 are expected be 2,100 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 1,200 pounds of rubber compound used to manufacture the tires. e. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.00 per pound. f. Desired ending Raw Materials Inventory is 30% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2019 is 1,200 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.20 hours of direct labor; direct labor costs average $10 per hour. h. Variable manufacturing overhead is $3 per tire. i. Fixed manufacturing overhead includes $4,000 per quarter in depreciation and $1,730 per quarter for other costs, such as utilities, insurance, and property taxes. j. Fixed selling and administrative expenses include $10,000 per quarter for salaries; $2,400 per quarter for rent; $1,650 per quarter for insurance; and $1,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 2% of sales. I. Capital expenditures include $45,000 for new manufacturing equipment, to be purchased and paid in the first quarter. m. Cash receipts for sales on account are 60% in the quarter of the sale and 40% in the quarter following the sale; December 31, 2018, Accounts Receivable is received in the first quarter of 2019; uncollectible accounts are considered insignificant and not considered for budgeting purposes. n. Direct materials purchases are paid 60% in the quarter purchased and 40% in the following quarter; December 2018, Accounts Pay able is paid in the first quarter of 2019. o. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. p. Income tax expense is projected at $2,500 per quarter and is paid in the quarter incurred. Goldman desires to maintain a minimum cash balance of $35 000 and borrows from the local bank as q. Goldman desires to maintain a minimum cash balance of $35,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter; principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000; interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter