* Problem 9-44 Comprehensive Master Budget; Borrowing; Acquisition of Automated Material- We really need to pet this new matcrial-handling equipmeat in operation just after the new year begins. I hope we can finance it largely with cash end marketable sccuritics, but if necesary we can aet a shortterm loan down at MetroBank." This statement by Beth Dicvica-Lowry, president of Intercoastal Electronies Company, concluded a meeting she had called with the firm's top management. Intercoantal is a amall, repidly atowing wholesalet of consumer electronic products. The firm'i main ptoduct lines are amall kitchen appliapcen and power tools. Marcis. Wlicox, Intercoastal's acneral manaper of marketing, has recently completed a sales forceast. She believen the company's sales during the first querter of 20x1 wall increase by 10 percent each month over the previous month's sales. Then Wilcax expects salea to remain constant for several months. Intercoastal' projected balance theet as of December 31. 20x0 is as fotlows: Jack Hanson, the assistant controller, is now preparing a monthly budeet for the first quarter of 201. In the process, the foliowing information has been accumulated: 1. Projected sales for December of 20xD are 5400,000 Ciedit sales typieally are 75 percent of total sales. Intercoustafts credit experience indicatei that 10 percent of the eredit sales are collected daring the ronth of cale, and the remainder are collected during the following month. 2. Intercoastal's coat of goods sold zenerally runs at 70 pereent of sales. Inhentory' is purchascd ou accouat, and 40 percent of each month's purehases are pidd during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to have inventony at tho end of each month equal to half of the aext month' 3. Hanson has eatimated that Intereoastal's other monthly expenses will be as follown: In addition, sales commistions run at the rate of 1 percent of sales. 4. Intercoastal's president, Davies-Lowry, has indicated that the firm should inveit $125,000 in an automated inventory-handling syntem to control the movement of inventory in the firm's warehouse just after the new year bejins. These equipment purchases will be financed primarily from the firm's cash and marketable securitics. However, Davics-Lowry believer that Intercoastal needs to keep a minimum cash balance of $25,000. If necessary, the remainder of the equipment purchases will be financed using shortterm eredit from a local baak. The minimum period for sach a loan is three months. Hanson believes thortterm interet rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary. Davies-Lowry has decided it should be paid of by the end of the fint quarter if possible. 5. Intercoastal's board of directors has indicated an intention to declare and pay dividends of $50,000 on the last day of each quarter. 6. The interest on any ahott term borrowing will be paid when the loan is repaid. Interest on Intercoastal's bonds is paid acmiannually on January 31 and Jaly 31 for the preceding sixmonth period. 7. Property taves ate paid aemiannually on February 28 and Angust 31 for the preeeding aix-month period Required: Prepare Intercoastal Electronics Company's master budset for the first quarter of 20x1 by completing the following scheduled and tatements 1. Sales budret 2. Cash receipta budget: 3. Purcheses budget: 4. Cash disburscments budget: 5. Complete the first three lines of the summary cash budget. Then do the analysis of shortterm financing neods in requirement 6. Then finish requirement 5 . Summary cash budget: 6. Ax 7. Prepare Intereoastal Electronica' budzeted income statement for the first quarter of 20s1. (Ignore income taxes.) 3. Prepare Intersoastal Electromics' budgeted atatement of retained carninys for the firat quarter of 20x1. 9. Prepare Intercoastal Electronica budgeted balance sheet as of March 31, 20x1. (Hint: On Mareh 31, 20x1. Bond Intereat Payable is $5,000 and Property Taxes Payable is $900.) * Problem 9-44 Comprehensive Master Budget; Borrowing; Acquisition of Automated Material- We really need to pet this new matcrial-handling equipmeat in operation just after the new year begins. I hope we can finance it largely with cash end marketable sccuritics, but if necesary we can aet a shortterm loan down at MetroBank." This statement by Beth Dicvica-Lowry, president of Intercoastal Electronies Company, concluded a meeting she had called with the firm's top management. Intercoantal is a amall, repidly atowing wholesalet of consumer electronic products. The firm'i main ptoduct lines are amall kitchen appliapcen and power tools. Marcis. Wlicox, Intercoastal's acneral manaper of marketing, has recently completed a sales forceast. She believen the company's sales during the first querter of 20x1 wall increase by 10 percent each month over the previous month's sales. Then Wilcax expects salea to remain constant for several months. Intercoastal' projected balance theet as of December 31. 20x0 is as fotlows: Jack Hanson, the assistant controller, is now preparing a monthly budeet for the first quarter of 201. In the process, the foliowing information has been accumulated: 1. Projected sales for December of 20xD are 5400,000 Ciedit sales typieally are 75 percent of total sales. Intercoustafts credit experience indicatei that 10 percent of the eredit sales are collected daring the ronth of cale, and the remainder are collected during the following month. 2. Intercoastal's coat of goods sold zenerally runs at 70 pereent of sales. Inhentory' is purchascd ou accouat, and 40 percent of each month's purehases are pidd during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to have inventony at tho end of each month equal to half of the aext month' 3. Hanson has eatimated that Intereoastal's other monthly expenses will be as follown: In addition, sales commistions run at the rate of 1 percent of sales. 4. Intercoastal's president, Davies-Lowry, has indicated that the firm should inveit $125,000 in an automated inventory-handling syntem to control the movement of inventory in the firm's warehouse just after the new year bejins. These equipment purchases will be financed primarily from the firm's cash and marketable securitics. However, Davics-Lowry believer that Intercoastal needs to keep a minimum cash balance of $25,000. If necessary, the remainder of the equipment purchases will be financed using shortterm eredit from a local baak. The minimum period for sach a loan is three months. Hanson believes thortterm interet rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary. Davies-Lowry has decided it should be paid of by the end of the fint quarter if possible. 5. Intercoastal's board of directors has indicated an intention to declare and pay dividends of $50,000 on the last day of each quarter. 6. The interest on any ahott term borrowing will be paid when the loan is repaid. Interest on Intercoastal's bonds is paid acmiannually on January 31 and Jaly 31 for the preceding sixmonth period. 7. Property taves ate paid aemiannually on February 28 and Angust 31 for the preeeding aix-month period Required: Prepare Intercoastal Electronics Company's master budset for the first quarter of 20x1 by completing the following scheduled and tatements 1. Sales budret 2. Cash receipta budget: 3. Purcheses budget: 4. Cash disburscments budget: 5. Complete the first three lines of the summary cash budget. Then do the analysis of shortterm financing neods in requirement 6. Then finish requirement 5 . Summary cash budget: 6. Ax 7. Prepare Intereoastal Electronica' budzeted income statement for the first quarter of 20s1. (Ignore income taxes.) 3. Prepare Intersoastal Electromics' budgeted atatement of retained carninys for the firat quarter of 20x1. 9. Prepare Intercoastal Electronica budgeted balance sheet as of March 31, 20x1. (Hint: On Mareh 31, 20x1. Bond Intereat Payable is $5,000 and Property Taxes Payable is $900.)