Case 8-33 Master Budget with Supporting Schedules [LO8-2, LO8-4, LO8-8, LO8-9, LO8-10] You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings 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 budget for the upcoming second quarter. 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-$15 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings): June (budget) July (budget) August (budget) September (budget) January (actual) February (actual) March (actual) April (budget) May (budget) 21,000 27,000 41,000 66,000 101,000 51,000 31,000 29,000 26,000 The concentration of sales before and during May is due to Mother's Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month. Suppliers are paid $4.50 for a pair of earrings. 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. All sales are on credit. Only 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. Monthly operating expenses for the company are given below: Variable: 4% of sales Sales commissions Fixed: $ 250,000 $ 23,000 $ 116,000 9,500 3,500 $ 19,000 Advertising Rent Salaries Utilities Insurance Depreciation Insurance is paid on an annual basis, in November of each year. The company plans to purchase $18,500 in new equipment during May and $45,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $18,750 each quarter, payable in the first month of the following quarter. The company's balance sheet as of March 31 is given below: Assets 79,000 Cash Accounts receivable ($40,500 February sales; $492,000 March sales) 532,500 118,800 23,500 Inventory Prepaid insurance Property and equipment (net) 1,000,000 $ 1,753,800 Total assets Liabilities and Stockholders' Equity Accounts payable Dividends payable 105,000 18,750 900,000 730,050 $ 1,753,800 Common stock Retained earnings Total liabilities and stockholders' equity Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules: 1. a. A sales budget, by month and in total. b. A schedule of expected cash collections, by month and in total. C. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. 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 $55,000. 3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach. 4. A budgeted balance sheet as of June 30. Complete this question by entering your answers in the tabs below. Req 1B Req 1D Req 1A Req 10 Req 3 Req 2 Req 4 Prepare a master budget for the three-month period ending June 30 that includes a sales budget, by month and in total. Sales Budget April May June Quarter Budgeted unit sales Selling price per unit Total sales Prepare a master budget for the three-month period ending June 30 that includes a budgeted balance sheet as of June 30. Earrings Unlimited Budgeted Balance Sheet June 30 Assets $ Total assets Liabilities and Stockholders' Equity Total liabilities and stockholders' equity Req 3 Reg 4 >