Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2017. Estimated Balance Sheet December 31, 2017 Assets Cash $ 37,000 Accounts receivable 520,000 Inventory 157,500 Total current assets $ 714,500 Equipment 588,000 Less: accumulated depreciation 73,500 Equipment, net 514,500 Total assets $ 1,229,000 Liabilities and Equity Accounts payable $ 375,000 Bank loan payable 14,000 Taxes payable (due 3/15/2018) 90,000 Total liabilities $ 479,000 Common stock 473,000 Retained earnings 277,000 Total stockholders’ equity 750,000 Total liabilities and equity $ 1,229,000: following information. The company’s single product is purchased for $30 per unit and resold for $54 per unit. The expected inventory level of 5,250 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, 7,500 units; February, 9,000 units; March, 11,500 units; and April, 10,000 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, $125,000 is collected in January and the remaining $395,000 is collected in February. 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, $80,000 is paid in January and the remaining $295,000 is paid in February. Sales commissions to 20% of sales. Sales salaries are $66,000 per year. General and administrative salaries are $144,000 per year. Maintenance expense $1,800 per month. Equipment reported in the December 31, 2017, balance sheet was purchased in January 2017. It is being depreciated over 8 years under the SLM with no salvage value. The amounts for new equipment purchases are planned: January, $33,600; February, $96,000; and March, $26,400. This equipment will be depreciated under the SLM 8 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 $170,000, which will be paid with cash on the last day of the month. 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. minimum ending cash balance of $35,000 at the end of each month. The income tax rate for the company is 39%. Income taxes will not be paid until April 15. Required: Prepare a master budget for each of the first three months of 2018

View less »