Completing a Master Budget The following data relate to the operations of Laker Company, a wholesale distributor:
Current assets as of March 31:
Cash $8,000
Accounts receivable $20,000
Inventory $36,000
Buildings and equipment, net $120,000
Accounts payable $21,750
Capital stock $150,000
Retained earnings $12,250

a. The grow margin is 25% of sales. (In other words, cost of goods sold is 75% of sales.)

b. Actual and budgeted sales data are as follows:
March (actual) $50,000
April $60,000
May $72,000
June $90,000
July $48,000

c. Sales are 60% of cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.

d. Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.

e. One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.

f. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets).

g. Equipment costing $1,500 will be purchased for cash in April.