CASE STUDY - BUDGETS i Saved Help Save & Exit Submit 10 Check my work Suppliers are paid $4.70 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. 100 Monthly operating expenses for the company are given below. points Variable : Sales commissions 4% of sales eBook Fixed : Advertising $ 270,060 Print Rent $ 25,000 References Salaries $ 120,000 Utilities $ 10, 500 Insurance $ 3,700 Depreciation $ 21,006 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $19,500 in new equipment during May and $47,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $20,250 each quarter, payable in the first month of the following quarter. The company's balance sheet as of March 31 is given below: Mc Graw HillCASE STUDY - BUDGETS i Saved Help Save & Exit Submit 10 Check my work Assets Cash $ 81,000 Accounts receivable ($35,620 February sales; $430,560 March sales) 466, 180 Inventory 124,832 100 Prepaid insurance 24,500 1, 020,000 points Property and equipment (net) Total assets $ 1, 716, 512 Liabilities and Stockholders' Equity eBook Accounts payable $ 107,000 Dividends payable 20,250 Print Common stock 940,000 Retained earnings 649, 262 References Total liabilities and stockholders' equity $ 1, 716, 512 The company maintains a minimum cash balance of $57,000. All borrowing is done at the beginning of a month; 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 $57,000 in cash. Required: Deanare a master budget for tha thron month marlad anding lung 20 Include the fallaiing dstalled sahadider. Mc Graw HillCASE STUDY - BUDGETS i Saved Help Save & Exit Submit 10 Check my work Case 8-33 (Algo) Master Budget with Supporting Schedules [LO8-2, LO8-4, LOS-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 100 located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain points 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. eBook The company sells many styles of earrings, but all are sold for the same price-$13 per pair. Actual sales of earrings for the last Print three months and budgeted sales for the next six months follow (in pairs of earrings): References January (actual) 21, 400 June (budget) 51, 400 February (actual) 27, 400 July (budget) 31,400 March (actual) 41, 400 August (budget) 29, 400 April (budget) 66, 400 September (budget) 26,400 May (budget) 101, 400 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 $4.70 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 Mc Graw HillCASE STUDY - BUDGETS i Saved Help Save & Exit Submit 10 Check my work PUSSIVIC IIIIII ILI CHICINS VI PI,VVV), WITHG SUIII ICWUIIIITY ULICUSL PJ, VVV III LUSII. Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules: 100 1. a. A sales budget, by month and in total. points 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. eBook 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 $57,000. Print 3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach. References 4. A budgeted balance sheet as of June 30. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req 1D Req 2 Req 3 Reg 4 Prepare a master budget for the three-month period ending June 30 that includes a budgeted balance sheet as of June 30. Earrings Unlimited Mc Graw HillCASE STUDY - BUDGETS i Saved Help Save & Exit Submit 10 Check my work Req 1A Req 1B Req 1C Req 1D Req 2 Req 3 Req 4 Prepare a master budget for the three-month period ending June 30 that includes a sales budget, by month and in total. 100 points Sales Budget April May June Quarter eBook Budgeted unit sales Print Selling price per unit Total sales References Mc Graw Prey 1 of 1 Next > HillCASE STUDY - BUDGETS i Saved Help Save & Exit Submit 10 Check my work June 30 Assets Cash 100 Accounts receivable points Inventory Prepaid insurance eBook Property and equipment, net Print References Total assets $ Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholders' equity $ 0 Mc Graw Hill