Case 9-31 Master Budget with Supporting Schedules [LO9-2, LO9-4, LO9-8, LO9-9, LO9-10] You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping mal's across the country. In the past, the company has done very little in the way of budgeting and at certain tmes of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare comprehensive budgets for the upcoming second quarter 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 $19 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings) January (actual) February (actual) March (actual Apri (budgat) May (budget) 23,000 June (budget) 29,000 July (budget) 3,000 August (budget) 68,000 Soptambor budgat) 103,000 53.000 33,000 31,000 2B,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 supp y 40% of the earrings sold in the following month. Suppliers are paid $5.5 for a pair of earrings. One-haif of a month's purchases is paid for in the month of purchase; the other half is paid for in the following month. Al sales are on credit, with no discount, and payable within 15 days. The company has found however, hat only 20% o a month's sales are collected in the month o sale. A additional 70% s collected in the following month and the remaining 10% is collected the second month following sale. Bad debts have been negligible Monthly operating expenses for the company are given below 4% of sales Fixed: Rent Salaries Utiities Insurance $350,000 $ 33,000 S136,000 $ 14,500 $ 4,500 29,000 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $23,500 in new equipment during May and $55,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $26,250 each quarter, payable in the first month of the following quarter. A listing of the company's ledger accounts as of March 31 is given below