In the fourth quarter of 2020, Eurofit Cycling, a bike shop, had the following net income: Sales
Question:
In the fourth quarter of 2020, Eurofit Cycling, a bike shop, had the following net income:
| Sales Less cost of sales | $550,000 |
| Gross margin | 300,000 |
| Selling and administration | 70,000 |
| Income before taxes | 230,000 |
| Income taxes Net income | 80,500 |
Purchases in the fourth quarter amounted to $195,000.
Estimated data for Eurofit Cycling for 2021 are as follows:
Quarter 1 Quarter 2 Quarter 3 Quarter 4
| Sales Cost of sales | $400,000 | $475,000 | $550,000 | $600,000 |
| Purchases | 160,000 | 200,000 | 225,000 | 267,000 |
| Selling and administration | 67,000 | 69,000 | 71,000 | 73,000 |
Taxes are 35 percent of pretax income and are paid in the quarter incurred. Fifty percent of sales are collected in the quarter of sale and 50 percent are collected in the next quarter. Seventy percent of purchases are paid in the quarter of purchase and 30 percent are paid in the next quarter. Selling and administrative expenses are paid in the quarter incurred except for $7,000 of depreciation included in selling and administrative expense. A capital expenditure for $20,000 is planned for the fourth quarter of 2021.
Required
Prepare a cash budget for each quarter of 2021.
