Be noted the required is to June 2016 Not December 2016.

You have just been hired as a new management Accountant by Saudi Jewellery, a distributor of earring to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash.

Since you are well trained in budgeting, you have decided to prepare a master budgets for the Fourth quarter of 2016 in order to show management the benefits that can be gained from an integrated budgeting program. To this end, you have worked with accounting and other areas to gather the information assembled below. The company sells many styles of earrings, but all are sold for the same price- $10 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):

Recent and forecast sales ( in units) January (actual)... 20,800 February (actual)... 26,000 March (actual)... 40,000 April (budget)... 65,000 May (budget)... 100,000 June (budget)... 50,000

July (budget)... 30,000

August (budget ... 28,000

September (budget) 25,000

The concentration of sales before and during May is due to Mothers Day.

The concentration of sales before and during May is due to Mother's Day.

Balance sheet at September 30, 2016

Assets Cash 74,000

Accounts receivable 346,000

Inventory 104,000

Prepaid insurance 21,000

Property and equipment (net) 950,000

Total assets $1,495,000

Liabilities and Stockholders' Equity

Accounts payable $100,000

Dividends payable 15,000

Capital stock 800,000

Retained earnings 580.000

Total liabilities & stockholders' equity $1.495.000

All sales are on credit. The collection of sales is as follows:

20% of a month's sales are collected in the month of sale.

70% is collected in the following month, and the remaining

10% is collected in the second month following sale.

Bad debts have been negligible.

Additional information: Cost to buy a pair of earrings from suppliers is S4 Desired ending inventory at the end of each month is 40% of the cost of goods sold in the following month.

Payment for purchases is as follows:

One-half of a month's purchases is paid for in the month of purchase; the other half is paid for in the following month.

Monthly operating expenses for the company are given below:

Variable monthly expenses:

Sales commissions 4% of month's sales paid as incurred

Fixed monthly expenses paid as incurred:

Advertising 200,000

Rent 18,000

Salaries 106,000

Utilities 7,000

Depreciation 14,000

Insurance is paid on an annual basis, in November of each year $36000 was paid on 1st of nov last year (i.e., $3000 per month).

The company plans to purchase $16,000 in new equipment during May and $40,000 in new equipment during June; both purchases will be for cash

The company declares dividends of $15,000 each quarter, payable in the first month of the following quarter.

The company maintains a minimum cash balance of $50,000. All borrowing is done at the beginning of a month and any repayments are made at the end of a month.

The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $50,000 in cash.

Required: Prepare a master budget for the three-month period ending December 31, 016.

Include the following detailed budgets: a. A sales budget, by month and in total N b. A schedule of expected cash collections from sales, by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. A schedule of expected cash disbursements for merchandise purchases, by month and in total.

2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000. 3. A budgeted income statement for the three-month period ending June 30 2014. Use the contribution approach.

4. A budgeted balance sheet as of June 30, 2014.

5. Based on the master budget that you prepared for the fourth quarter of 2016, what would you expect the results to be for the fourth quarter of the year.

6: Define strategic plan, long range plan, capital budgets and a master budget.

7. Briefly explain the major benefits of budgets 8. Explain the potential problems in implementing budgets g. Differentiate between an operating budget and a financial budget.