1. **Problem Statement:** Prepare a master budget for Vision Company for the first quarter including sales budget, inventory purchases budget, operating expenses budget, cash budget, budgeted income statement, and budgeted balance sheet based on the provided data. 2. **Sales Budget and Cash Collections:** - Sales for each month: December $280,000, January $400,000, February $600,000, March $300,000, April $200,000. - Sales are 20% cash, 80% credit. - Credit sales collected next month. Calculate cash collections: - January collections = 20% of January sales + 80% of December sales - February collections = 20% of February sales + 80% of January sales - March collections = 20% of March sales + 80% of February sales 3. **Inventory Purchases Budget:** - Gross profit rate = 40%, so cost of goods sold (COGS) = 60% of sales. - Inventory on hand at month end = 25% of next month’s COGS. - Purchases = COGS + ending inventory - beginning inventory. Calculate for each month: - COGS = 60% of sales - Ending inventory = 25% of next month’s COGS - Beginning inventory for January = $60,000 (given) 4. **Schedule of Cash Payments for Inventory:** - Half of purchases paid in month of purchase, half in following month. 5. **Operating Expenses Budget:** - Salaries and wages = $27,000/month - Advertising = $70,000/month - Shipping = 5% of sales - Depreciation = $140,000/month - Other expenses = 3% of sales 6. **Schedule of Cash Payments for Operating Expenses:** - Depreciation is non-cash, exclude from cash payments. - Other expenses, shipping, salaries, advertising are paid in the month incurred. 7. **Cash Budget:** - Start with beginning cash $48,000. - Add cash collections. - Subtract cash payments for inventory, operating expenses, equipment purchases, dividends. - Maintain minimum cash balance $30,000. - Borrow or repay as needed in multiples of $1,000. 8. **Budgeted Income Statement:** - Sales - Less COGS - Gross profit - Less operating expenses (including depreciation) - Net income before interest and taxes - Less interest expense (12% annual on borrowings) - Net income 9. **Budgeted Balance Sheet:** - Update assets: cash, accounts receivable, inventory, equipment - Update liabilities: accounts payable, borrowings - Update equity: capital stock, retained earnings (add net income, subtract dividends) **Final answers require detailed month-by-month calculations using above steps.**