Terry's Equipment Center has been organized to sell a line of lawn and garden equipment. The company began operations on January 1 with the following assets:

Sales for January, February, and March (i.e., the first quarter) are expected to be $140,000; they are expected to be $280,000 for the next three months, and $325,000 for the three months after that. Certain expenses are expected to vary with sales as follows:

Other expenses not expected to vary with sales:

Required:
Prepare an operating budget for the first and second quarters of operations for Terry's Equipment Center.

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Cash Inventory Land 514,000 29,000 31,000 Buildings and equipment $250,000 (useful life 20 years, no residual value, of which $210,000 relates to selling and $40,000 to general and administrative activities) Cost of goods sold Bad debts Variable selling expenses Variable administrative expenses Percent of Sales Dollars 60 2 14 Selling Administrative Depreciation $25,000 per quarter 18,550 per quarter 3,125 per quarter