Problem $20-8$AA $($Static$)$ Merchandising: Preparation of a complete master budget LO P$4$ Dimsdale Sports, a merchandising company, reports the following balance sheet at December $31.$ DIMSDALE SPORTS COMPANYBalance SheetDecember $31$Assets$$Cash$$$ $36,000$Accounts receivable$525,000$Inventory$150,000$Equipment$ $540,000$Less: Accumulated depreciation$67,500472,500$Total assets$$$$1,183,500$Liabilities and Equity$$Liabilities$$Accounts payable$ $360,000$Loan payable$15,000$Taxes payable $($due March $15)90,000$$ $465,000$Equity$$Common stock$ $472,500$Retained earnings$246,000718,500$Total liabilities and equity$$$ $1,183,500$ To prepare a master budget for January, February, and March, use the following information. The company$$s single product is purchased for $$30$ per unit and resold for $$55$ per unit. The inventory level of $5,000$ units on December $31$ is more than management$$s desired level, which is $20\%$ of the next month$$s budgeted sales units. Budgeted sales are January, $7,000$ units; February, $9,000$ units; March, $11,000$ units; and April, $10,000$ units. All sales are on credit. Cash receipts from sales are budgeted as follows: January, $$221,250$; February, $$697,000$; March, $$489,500.$ Cash payments for merchandise purchases are budgeted as follows: January, $$80,000$; February, $$302,800$; March, $$147,600.$ Sales commissions equal to $20\%$ of sales dollars are paid each month. Sales salaries $($excluding commissions$)$ are $$5,000$ per month. General and administrative salaries are $$12,000$ per month. Maintenance expense equals $$2,000$ per month and is paid in cash. New equipment purchases are budgeted as follows: January, $$36,000$; February, $$96,000$; and March, $$28,800.$ Budgeted depreciation expense is January, $$6,000$; February, $$7,000$; and March, $$7,300.$ The company budgets a land purchase at the end of March at a cost of $$150,000,$ which will be paid with cash on the last day of the month. The company has an agreement with its bank to obtain additional loans as needed. The interest rate is $1\%$ per month and interest is paid at each month$-$end based on the beginning$-$month balance. Partial or full payments on these loans are made on the last day of the month. The company maintains a minimum ending cash balance of $$25,000$ at the end of each month. The income tax rate for the company is $40\%.$ Income taxes on the first quarter$$s income will not be paid until April $15.$ Required: Prepare a master budget for the months of January, February, and March that has the following budgets: Sales budget. Merchandise purchases budgets. Selling expense budgets. General and administrative expense budgets. Hint: Depreciation is included in the general and administrative budget for merchandisers. Capital expenditures budgets. Cash budgets. Budgeted income statement for entire quarter $($not monthly$)$ ended March $31.$ Budgeted balance sheet as of March $31.$