Data 8 EARRINGS UNLIMITED $15,000 Minimum ending cash balance $50,000 Dividends declared each quarter Selling price $10 Balance sheet at March 3 Recent and forecast sales January (actual) 20,000 Assets 26,000 Cash $74,000 February (actual) March (actual 40,000 Accounts receivable 346.000 65,000 04.000 April nventory May 100.000 Prepaid insurance 21,000 June 50,000 Property and equipment (net) 950.000 Total assets $1,495.000 July 30,000 August 28,000 September Liabilities and Stockholders' Equity 25,000 $100,000 Accounts payable Desired ending inventories (percentag 40% 15,000 ividends payable of next month's sales) Capital stock 800.000 Cost of earrings $4. 580.000 Retained earnings $1,495.000 Total liabilities and equity Purchases paid as follows In month of purchase Annual interest In following month 50% ust been hired as a new mihagement trainee by Earrings You have Collection on sales: Unlimited, a distributor of earrings to various retail outlets located in Sales collected current month 20% shopping malls across the country. In the past, the company has Sales collected following month 70% done very little in the way of budgeting and at certai times of the Sales collected 2nd month following year has experienced a shortage of cash Monthly expenses are Variable Since you are well trained n budgeting, you have decided to prepare Sales commissions 4% comprehensive budgets for the upcoming second quarter in order to Fixed show management the benefits that can be gained from an integrated $200,000 budgeting program. To this end, you have worked with accou Advertising ng Rent $18,000 and other areas to gather the information assembled on this page Salaries $106,000 Utilities $7,000 The company sells many styles of earrings, but all are sold for the $3,000 same price-$10 per pair. Actual sales of earrings for the last three nsurance Depreciation $14,000 months and budgeted sales for the next six months are listed this page to the right.(in pairs of earrings) $16,000 The concent ration of sales before and during May is due to Mothers Equipment purchased in May Equipment purchased in June $40,000 Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings so the following mont d in Supplies are paid $4 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, with no discou 5 days. The company has nt, and payable with four nd, however, that only 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the follow ng month, and the remaining 10% is collected in the second month following sa Bad debts have been negligible Monthly expenses are listed above for both fixed and variable. Insurance is paid on an annual basis n November of each year. The company plans to purchase $16,000 in new equipment in 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. A listing of the company's ledger accounts as of March 31 is given above in the form of a balance sheet