Question

DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2017 Assets Cash $ 36,000 Accounts receivable 520,000 Inventory 100,000 Total current assets $ 656,000 Equipment 576,000 Less: accumulated depreciation 72,000 Equipment, net 504,000 Total assets $ 1,160,000 Liabilities and Equity Accounts payable $ 370,000 Bank loan payable 14,000 Taxes payable (due 3/15/2018) 91,000 Total liabilities $ 475,000 Common stock 474,000 Retained earnings 211,000 Total stockholders’ equity 685,000 Total liabilities and equity $ 1,160,000 To prepare a master budget for January, February, and March of 2018, management gathers the following information. The company’s single product is purchased for $20 per unit and resold for $55 per unit. The expected inventory level of 5,000 units on December 31, 2017, is more than management’s desired level, which is 20% of the next month’s expected sales (in units). Expected sales are: January, 7,000 units; February, 9,250 units; March, 11,250 units; and April, 9,000 units. Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 61% is collected in the first month after the month of sale and 39% in the second month after the month of sale. For the December 31, 2017, accounts receivable balance, $130,000 is collected in January and the remaining $390,000 is collected in February. Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2017, accounts payable balance, $65,000 is paid in January and the remaining $305,000 is paid in February. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $60,000 per year. General and administrative salaries are $132,000 per year. Maintenance expense equals $2,100 per month and is paid in cash. Equipment reported in the December 31, 2017, balance sheet was purchased in January 2017. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $33,600; February, $91,200; and March, $26,400. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full month’s depreciation is taken for the month in which equipment is purchased. The company plans to buy land at the end of March at a cost of $175,000, which will be paid with cash on the last day of the month. The company has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $49,000 at the end of each month. The income tax rate for the company is 39%. Income taxes on the first quarter’s income will not be paid until April 15. Required: Prepare a master budget for each of the first three months of 2018; include the following component budgets: 1. Monthly sales budgets. 2. Monthly merchandise purchases budgets. 3. Monthly selling expense budgets. 4. Monthly general and administrative expense budgets. 5. Monthly capital expenditures budgets. 6. Monthly cash budgets. 7. Budgeted income statement for the entire first quarter (not for each month). 8. Budgeted balance sheet as of March 31, 2018.

Need help with the last 4 steps

Answer 1

Answer a
Sales Budget
	Jan	Feb	Mar	Total
Sales in Units	7,000	9,250	11,250	27,500
Sp Per Unit	55	55	55	55
Total Sales in $	385,000	508,750	618,750	1,512,500
Cash Sales - 25% of Sales	96,250	127,188	154,688	378,125
Credit Sales - 75% of Sales	288,750	381,563	464,063	1,134,375
Answer b
Schedule of Expected Cash Collections from Sales
	Jan	Feb	Mar	Total
Cash Sales	96,250	127,188	154,688	378,125
Collection from Accounts Receivables
Accounts Receivable - Beg. Balance	130,000	390,000		520,000
Jan Sales	-	176,137	112,613	288,750
Feb. Sales	-	-	232,753	232,753
Mar. Sales	-	-	-	-
Total cash Collections	226,250	693,325	500,054	1,419,628
Answer c
Merchandise Purchase Budget
	Jan	Feb	Mar	Total
Sales In units	7,000	9,250	11,250	27,500
Add: Closing Inventory in units	1,850	2,250	1,800	2,000
Total Needs	8,850	11,500	13,050	29,500
Less: opening Inventory in uints	(5,000)	(1,850)	(2,250)	(5,000)
Required Purchases in Units	3,850	9,650	10,800	24,500
Price per Unit	20	20	20	20
Total Purchases in $	77,000	193,000	216,000	486,000
Answer d
Schedule of Cash payments to Suppliers
	Jan	Feb	Mar	Total
Cash Payment
Accounts Payable - Beginning	65,000	305,000	-	370,000
Jan Purchases	-	15,400	61,600	77,000
Feb Purchases	-	-	38,600	38,600
Mar Purchases				-
Total Cash Payment to Suppliers	65,000	320,400	100,200	485,600
Answer e
Selling & Admn. Budget
	Jan	Feb	Mar	Total
Sales Comm. - 20% of Sales	77,000	101,750	123,750	302,500
Fixed
Sales Salaries	5,000	5,000	5,000	15,000
General & Admn. Salaries	11,000	11,000	11,000	33,000
Maint. Exp.	2,100	2,100	2,100	6,300
Dep.	6,350	7,300	7,575	21,225
Total	101,450	127,150	149,425	378,025
Calculation of Dep. Exp.
	Jan	Feb	Mar	Total
Equipment in the Beginning	6,000	6,000	6,000	18,000
Purch in Jan.	350	350	350	1,050
Purch in Feb		950	950	1,900
Purch in Mar			275	275
Total Dep.	6,350	7,300	7,575	21,225
Schedule of Cash payments of Selling & Admn. Budget
	Jan	Feb	Mar	Total
Sales Comm. - 20% of Sales	77,000	101,750	123,750	302,500
Fixed
Sales Salaries	5,000	5,000	5,000	15,000
General & Admn. Salaries	11,000	11,000	11,000	33,000
Maint. Exp.	2,100	2,100	2,100	6,300
Total	95,100	119,850	141,850	356,800
Monthly Capital Expenditure Budget
	Jan	Feb	Mar	Total
Equipment Purchased	33,600	91,200	26,400	151,200
Land Purchased	-	-	175,000	175,000
Total Capital Expenditure	33,600	91,200	201,400	326,200
Cash budget
	Jan	Feb	Mar	Total
Opening cash Balance	36,000	54,410	216,285	36,000
Add: receipts
Collection from Customers	226,250	693,325	500,054	1,419,628
Total Cash available	262,250	747,735	716,338	1,455,628
Less: Disbursements
Cash Disbursement - Accounts Payable	65,000	320,400	100,200	485,600
Selling & Admn. Exp.	95,100	119,850	141,850	356,800
Purchase of Equipment	33,600	91,200	26,400	151,200
Purchase of Land	-	-	175,000	175,000
Income Tax Paid			91,000	91,000
Total Disbursement	193,700	531,450	534,450	1,259,600
Cash Balance Closing	68,550	216,285	181,888	196,028
Add: Finance from Bank	-			-
Less: Payment to Bank	(14,000)	-	-	(14,000)
Less: Payment of interet - Bank loan	(140)	-	-	(140)
Net Cash Balance Closing	54,410	216,285	181,888	181,888
Income Statement
For the Qtr Ending Mar-31, 2018
Sales		1,512,500
Less: Variable Cost
Cost of Goods Sold	550,000
Sales Comm. - 20% of Sales	302,500	852,500
Contribution		660,000
Less: Fixed Cost
Sales Salaries	15,000
General & Admn. Salaries	33,000
Maint. Exp.	6,300
Dep.	21,225	75,525
Operating Profit		584,475
Less: Interest Expenses		140
Net Income		584,335
Less: Income Tax - 39%		227,891
Net Income After Tax		356,444
Balance Sheet
As on Mar 31
Assets
Current Assets
Cash	181,888
Accounts receivables	612,872
Inventory	36,000	830,760
Fixed Assets
Equipment	576,000
Add: Addition during the Qtr.	151,200
Less: Dep.	(93,225)	633,975
Land		175,000
Total Assets		1,639,735
Liabilities
Accounts Payable	370,400
Income Tax Payable	227,891
Total liabilities		598,291
Shareholders's Equity
Common Stock	474,000
Retained Earnings	567,444
Total Stockholders equity		1,041,444
Total liabilities & Stockholders' Equity		1,639,735		-
Schedule of Retained Earnings
Opening Balance		211,000
Add: net income		356,444
Less: Dividend declared		-
Closing Balance		567,444