Near the end of 2013, the management of Dimsdale Sports Co., a merchandising com

Question

Near the end of 2013, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2013 DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2013 Assets 35,000 520,000 Cash Accounts receivable 142,500 Inventory Total current assets Equipment Less accumulated depreciation 697,500 542,000 67,750 Equipment, net 474,250 Total assets $ 1,171,750 Liabilities and Equity 355,000 Accounts payable 15,000 90,000 Bank loan payablee Taxes payable (due 3/15/2014) Total liabilities Common stock Retained earnings $ 460,000 472,500 239,250 Total stockholders' equity 711,750 Total liabilities and equity $ 1,171,750 To prepare a master budget for January, February, and March of 2014, management gathers the following information. a. Dimsdale Sports' 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, 2013, is more than management's desired level for 2014, which is 20% of the next month's expected sales (in units). Expected sales are: January, 7,000 units; February, 9,300 units; March, 11,000 units, and April, 10,000 units. b. Cash sales and credit sales represent 30% and 70%, respectively, of total sales. Of the credit sales, 63% is collected in the first month after the month of sale and 37% in the second month after the month of sale. For the December 31, 2013, accounts receivable 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, 2013, accounts payable balance, $75,000 is paid in January and the remaining $280,000 is paid in February. commissions) are $60,000 per year. $2,100 per month and is paid in cash. d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding e. General and administrative salaries are $132,000 per year. Maintenance expense equals

Explanation / Answer

Solution:

January Feburary March Sales in units 7,000 9,300 11,000 Sellimg price per unit 52 52 52 Total budgeted sales                 364,000                  483,600            572,000 Cash sales 30%                 109,200                  145,080            171,600 Sales on credit 70%                 254,800                  338,520 400,400

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