Question

Near the end of 2017, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2017 DİMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2017 Assets Cash $ 35,000 142,500 588,000 Accounts receivable Total current assets $ 697,500 Equipment Less: accumulated depreciation Total assets Accounts payable 73,500 Equipment, net 514,500 S 1,212,000 Liabilities and Equity 360,00 16,000 92,000 Bank loan payable axes payable (due 3/15/2018) Common stock Total stockholders' equity $468,000 1 liabilities 470, 500 273,500 Retained earnings 744,000 5 1,212,000 Total liabilities and equity To prepare a master budget for January, February, and March of 2018, management gathers the ollowing information a. The company's single product is purchased for $30 per unit and resold for $52 per unit. The expected inventory level of 4,750 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, 6,500 units, February, 9,000 units, March, 10,500 units, and April, 10,000 units. b. Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the creditsales, 59%)s colected in the frst month after the month ofsale and 41% in the second month after the month of sale For the December 3,207, accounts reenable balance, $125,000 is collected in January and the remaining $395,000 is collected in February c 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, $90,000 is paid in January and the remain $270,000 is paid in February d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $72,000 per year e. General and administrative salaries are $144,000 per year. Maintenance expense equals $2.000 per month and is paid in cash. f. Equipment reported in the December 31, 2017, balance sheet was purchased in January 2017. lt is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases ar coming quarter: January. $33.600: February. $96,000: and March. $28,800. This equipment will be depreciated under the straigh line method over eight years with no salvage value. A full month's depreciation iltaken for the month in purchased g. The company plans to buy land at the end of March at a cost of $155,000, which will be paid with cash on pany has a working arrangement with its bank to obtain additional loans as needed . The interest rate is 12% per year and Next Prey 1 of 1 d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $72,000 per year General and administrative salaries are $144,000 f. Equipment reported in the December 31, 2017, balance sheet was purchased in January 2017. It is being depreciated per year. Maintenance expense equals $2,000 per month and is paid in cash. 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, $96,000; and March, $28,800. 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 purchased. g. The company plans to buy land at the end of March at a cost of $155,000, which will be paid with cash on the last day of the month. h. 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 $17140 at the end of each month i. The income tax rate for the company is 41%. 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 Pre 1 of 1Next Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 6 Required8 Calc Cash BudRequired Monthly merchandise purchases budgets. DIMSDALE SPORTS cO Merchandise Purchases Budget January, February, and March 2018 January February March Next month's budgeted sales (units) Ratio of inventory to future sales Budgeted ending inventory (units) Budgeted units sales for month Required units of available merchandise 9,000 10,500 20% 10,000 20% 20% Units to be purchased Prey1 of 1 Next Reduired 6 Required G Required 1 Required 2 Required 3 Required 4 Required 5 Required 7 Required 8 Cash Bud Monthly sales budgets DIMSDALE SPORTS CO Sales Budget For January, February, and March 2018 Budgeted Unit Budgeted Budgeted Total Sales Unit Price Dollars January February March 6,500「 $ 9,000 10,500 26,000 52 52 52 338,000 468,000 546,000 Totals for the quarter 1,352,000 Required 2> 1 of 1 Te Required 1 Requfred 2 Required 3 Required 4 Required 5Required Required Required 7 Required s CcCash Bud Required 7 Required 8 Calc Monthly merchandise purchases budgets DIMSDALE SPORTS Co Merchandise Purchases Budget January, February, and March 2018 March January February 9,000 10,000 20% 10,500 20% Next month's budgeted sales (units) Ratio of inventory to future sales Budgeted ending inventory (units) Budgeted units sales for month Required units of available merchandise 20% eginning inventory (units) Units to be purchased 1 of 1 Required 2 Requided 4 Required 5 Required 6 Required 6 Required 1 3 Required Calc Cash BudRequired 7 Required 8 Monthly selling expense budgets. DIMSDALE SPORTS COMPANY Selling Expense-Budget January, February, and March 2018 January February March Budgeted sales Sales commissions Required 2 Required 4 > ot Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 6 Required 7 Cash Bud Required 8 Calc Monthly selling expense budgets DIMSDALE SPORTS COMPANY Selling Expense Budget anuary, February, and March 2018 March February January Budgeted sales Sales commission percent Sales salaries Total budgeted selling expensés Required 4 Required 1 Required 2Required 3 Required 4 Required 5 Required 6 Required 6 Cash Bud Required 7 Required 8 Calculate the budgeted cash receipts and cash payments. (Negative valges should be indicated with minus sign. Round your final answers to the nearest whole dollar.) Calculation of Cash receipts from customers: January February March Sales in units Selling price per unit Total budgeted sales Cash sales Sales on credit 25% 75% March 31 Collected in March Receivable February Total January Accounts Receivable - January 520,000 125,000 S 395,000 sales from 1 of 1 Ne Prey Sales in units Selling price per unit Total budgeted sales Cash sales Sales on credit 25% 75% March 31 Collected in March Receivable February TotalJanuary Accounts Receivable - January 520,000 125,000 S 395,000 Credit sales from January February March 125,000 | $ . 395,000 | S ゲ01 $ Total cash receipts from customers March February January 1 of 1 Next Janua Febru Marc Collections of receivables Calculation of payments for merchandise January February March Desired ending inventory (units) Budgeted sales in units Total units required Beginning inventory (units) Number of units to be purchased Cost per unit Total cost of purchases March 31 Paid in Payable March February TotalJanuary S 360,000 S 90,000 270,000 Accounts Payable -January 1 rchandise purchases in aniian Cost per unit Total cost of purchases March 31 Paid in February March Payable TotalJanuary 90,000 270,000 Accounts Payable -January1 $ 360,000 S 9 Merchandise purchases in: January February March ces S 90,000 S 270,000 S Total cash paid for merchandise Required 6 Cash Bud Required 5 Check my work February March S 125,000 S 395,000 $ Total collection of receivables Total cash receipts from customers February March January Collections of receivables Calculation of payments for merchandise March February January Desired ending inventory (units) Budgeted sales in units Total units required Beginning inventory (units) Number of units to be purchased Total cost of purchases 1 of 1 AM Required 6 Required 6 Required 1 Required 2 Required 3 Required 4 Required 5 Calc Cash Bud Required 7 Required 8 Monthly cash budgets. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.) DİMSDALE SPORTS CO Cash Budget January, February, and March 2018 February January March Beginning cash balance Additional loan (loan repayment) Cash receipts from customers General & administrative salaries Interest on bank loan Check January Beginning cash balance Total cash available Cash payments for Total cash payments Preliminary cash balance Ending cash balance of 1 HE Prev 100 points eBook Total cash payments Preliminary cash balance Ask Ending cash balance References Loan balance March February January Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month Required 7> Required 6 Calc 7. Budgeted income statement for the entire first quarter (not for each month). 8. Budgeted balance sheet as of March 31, 2018 Complete this question by entering your answers in the tabs below. Required 1Required 2 Required 3| Required 4 Required 5 Required 6 Required 6 Calc Cash Bud |Required 7-Required 8 Budgeted balance sheet as of March 31, 2018. (Round your final answers to the nearest whole dollar.) DIMSDALE SPORTS CO Budgeted Balance Sheet March 31, 2018 Assets Total current assets nninment net Next Prev 1 of 1l Check my v Assets Total current assets Equipment, net Total assets Liabilities and Equity Liabilities Bank loan payable Total liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity re от March 31, 2018 Assets Book Ask Total current assets Print erences Bank loan payable Cash Common stock Cost of goods sold Depreciation expense Total liabilities Stockholders' Equity of 1 OL S Assets Total current assets Other cash expenses Retained earnings Salaries expense Salaries payable Sales Total liabilities Stockholders' Equit)y ilti

Answer 1

Answer to Question 1:

Question 1: Sales Budget Budgeted Unit Budgeted Unit Budgeted Total Sales Dollars Calculation Price 6,500 9,000 10,500 52 52 52 anuary February March 4,68,000 |(9000 52) 5,46,000 (10500*52)

Answer to Question 2:

Question 2: Merchandise Purchase Budget February March January Next month budgeted sales Ratio of inventory to future sales Add: Ending Inventory Calculation 9,000 10,500 10000 20% 20% 20% 1,800 2,100 2,000 (9000*2096) (10500*20%) (10000*20%) Budgeted unit sales for the month Total units required Calculation Less: Opening Inventory Units to be purchased Calculation 6,500 9,000 10,500 10,800 12,600 12,000 (1,800 + 6,500) (2,1009,000) (2,00010,500) 4,750 1,800 2,100 6,050 10,800 9,900 (10,800 4,750) (12,600 1,800) (12,000 2,100)

Answer to Question 3 and 4:

Question 3: Selling Expenses Budget February March January Budgeted Sales Sales commission percent Sales commission Calculation Sales salaries (72,000/12) Total Budgeted selling expenses Calculation 5,46,000 3,38,000 4,68,000 20% 93,600 20% 20% 67,600 1,09,200 (338,000*20%) (468,000*20%) (546,000*20%) 6,000 $ 6,000 $ 6,000 1,15,200 (67,600 + 6000)(93,600 6,000) (109,200 6,000) 73,600 99,600 Question 4 General and Administrative Expense February March January General and administrative salaries (144,000/12 Maintenance expense Total 12,000 $ 12,000 $ 12,000 2,000 $ 14,000 $ 2,000 $ 14,000 $ 2,000 14,000