Rocky Shoes sells snow climbing shoes worldwide. They expect to sell 8,500 pairs for $180 each in January 2016; 3,500 pairs for $190 each in February 2016; 4,100 pairs for $260 each in March 2016; and, 3,500 pairs for $250 each in April 2016. Sales in November 2015 and December 2015 were $400,000 and $425,000, respectively. Rocky’s shoes cost of goods sold average 60% of Sales Revenue. Their target ending inventory is $10,000 plus 50% of next month’s cost of goods sold. All sales are on account. Accounts are collected 50% in the month of sale; 30% in the month after the sale; 18% two months after the sale; and, 2% are never collected. Rocky's shoes pays for their purchases 50% in the month of purchase and 50% in the month after purchase.
Rocky's has operating expenses of $30,000 per month of salaries, 1% sales commission, $15,000 rent per month and $5,000 depreciation of equipment per month. All operating expenses except salaries and commissions are paid in the month of incurrence. All commissions and 50% of salaries are paid in the month following incurrence. The company requires a minimum balance of $100,000. Clutcher has a line of equity with their bank to borrow needed funds in increments of $1,000 at an interest rate of 10%. They pay back any borrowings from excess cash as it becomes available. The Cash balance as of December 2015 is $9,500. In February, they plan to purchase a new piece of equipment that will help with the increased production they are expecting beginning in March 2016. The equipment and its installation are expected to cost $457,300. The equipment will be placed in service April 1, 2016. In March they plan to declare and pay a dividend of $150,000 and purchase a parcel of land for their expansion plans costing $2 million for which they will make a down payment of $250,000 and sign a long-term, 8%, 10 year note for the balance.
Required:
Complete the following for the first quarter of 2016, showing each month and a quarter total (Round all calculations to the nearest dollar) (Ignore Income Taxes):
1. Sales Budget
2. Inventory, Cost of Goods Sold, Purchases Budget
3. Operating Expense Budget
4. Cash Receipts Budget, including Net A/R balance for March and Uncollectible expense for the quarter
5. Cash Disbursements for Inventory, including A/P balance for March
6. Cash Disbursements for Operating Expenses
7. Cash Budget, including any necessary borrowing and repayments
8. Budgeted Income statement for March 2016