Insurance is paid on an annual basis, in November of each year.

The company plans to purchase $24,000 in new equipment during May and $56,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $27,000 each quarter, payable in the first month of the following quarter.

The companys balance sheet as of March 31 is given below:

Assets
Cash	$	90,000
Accounts receivable ($58,400 February sales; $691,200 March sales)		749,600
Inventory		152,768
Prepaid insurance		29,000
Property and equipment (net)		1,110,000
Total assets	$	2,131,368
Liabilities and Stockholders Equity
Accounts payable	$	116,000
Dividends payable		27,000
Common stock		1,120,000
Retained earnings		868,368
Total liabilities and stockholders equity	$	2,131,368

The company maintains a minimum cash balance of $66,000. 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 $66,000 in cash.

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 $66,000.

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.

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	68,200	103,200	53,200	224,600
Selling price per unit	$20	$20	$20	$20
Total sales	$1,364,000	$2,064,000	$1,064,000	$4,492,000

Prepare a master budget for the three-month period ending June 30 that includes a schedule of expected cash collections, by month and in total.

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Schedule of Expected Cash Collections
	April	May	June	Quarter
February sales	$58,400	20,640		$79,040
March sales	604,800	86,400		691,200
April sales	272,800	954,800	136,400	1,364,000
May sales	20,640	412,800	1,444,800	1,878,240
June sales			212,800	212,800
Total cash collections	$956,640	$1,474,640	$1,794,000	$4,225,280

Prepare a master budget for the three-month period ending June 30 that includes a merchandise purchases budget in units and in dollars. Show the budget by month and in total. (Round unit cost to 2 decimal places.)

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Merchandise Purchases Budget
	April	May	June	Quarter
Budgeted unit sales	68,200	103,200	53,200	224,600
Add: Desired ending merchandise inventory	41,280	21,280	13,280	13,280
Total needs	109,480	124,480	66,480	237,880
Less: Beginning merchandise inventory	27,280	41,280	21,280	27,280
Required purchases	82,200	83,200	45,200	210,600
Unit cost	$5.60	$5.60	$5.60	$5.60
Required dollar purchases	$460,320	$465,920	$253,120	$1,179,360

Prepare a master budget for the three-month period ending June 30 that includes a schedule of expected cash disbursements for merchandise purchases, by month and in total.

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Budgeted Cash Disbursements for Merchandise Purchases
	April	May	June	Quarter
Accounts payable				$0
April purchases	230,160	230,160		460,320
May purchases		232,960	232,960	465,920
June purchases			126,560	126,560
Total cash payments	$230,160	$463,120	$359,520	1,052,800

Prepare a master budget for the three-month period ending June 30 that includes 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 $66,000. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

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Cash Budget
For the Three Months Ending June 30
	April	May	June	Quarter
Beginning cash balance	$90,000	$66,280	$403,600	$90,000
Add collections from customers	936,000	1,454,000	1,794,000	4,184,000
Total cash available	1,026,000	1,520,280	2,197,600	4,274,000
Less cash disbursements:
Merchandise purchases				0
Advertising	360,000	360,000	360,000	1,080,000
Rent	34,000	34,000	34,000	102,000
Salaries	138,000	138,000	138,000	414,000
Commissions	54,560	82,560	42,560	179,680
Utilities	15,000	15,000	15,000	45,000
Equipment purchases	0	24,000	56,000	80,000
Dividends paid	27,000	0	0	27,000
Total cash disbursements	628,560	653,560	645,560	1,927,680
Excess (deficiency) of cash available over disbursements	397,440	866,720	1,552,040	2,346,320
Financing:
Borrowings	15,000	0	0	15,000
Repayments	0	0	(15,000)	(15,000)
Interest	0	0	(450)	(450)
Total financing	15,000	0	(15,450)	(450)
Ending cash balance	$412,440	$866,720	$1,536,590	$2,345,870

Prepare a master budget for the three-month period ending June 30 that includes a budgeted income statement for the three-month period ending June 30. Use the contribution approach.

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Budgeted Income Statement
For the Three Months Ended June 30
Sales		$4,492,000
Variable expenses:
Cost of goods sold	1,257,760
Commissions	179,680
		1,437,440
Contribution margin		3,054,560
Fixed expenses:
Utilities	45,000
Insurance	13,800
Advertising	1,080,000
Depreciation	90,000
Rent	102,000
Salaries	414,000
		1,744,800
Net operating income		1,309,760
Interest expense		(450)
Net income		1,309,310

Prepare a master budget for the three-month period ending June 30 that includes a budgeted balance sheet as of June 30.

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Budgeted Balance Sheet
June 30
Assets
Cash	$1,177,070
Accounts receivable	1,057,600
Inventory	74,368
Prepaid insurance	15,200
Property and equipment, net	1,100,000
Total assets	$3,424,238
Liabilities and Stockholders Equity
Accounts payable	$126,560
Dividends payable	27,000
Common stock
Retained earnings
Total liabilities and stockholders equity	$153,560