I've already done most of this project, and have some of the solution provided at the bottom. If you could help me complete this (Formatted formally/neatly) I would greatly appreciate it.

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 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$13 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)	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 Mothers 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 $4.7 for a pair of earrings. One-half of a months 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 discount, and payable within 15 days. The company has found, however, that only 20% of a months 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:
Sales commissions		4%	of sales
Fixed:
Advertising	$	270,000
Rent	$	25,000
Salaries	$	120,000
Utilities	$	10,500
Insurance	$	3,700
Depreciation	$	21,000

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.

A listing of the companys ledger accounts as of March 31 is given below:

Assets
Cash	$	81,000
Accounts receivable ($35,620 February sales; $430,560 March sales)		466,180
Inventory		124,832
Prepaid insurance		24,500
Property and equipment (net)		1,020,000
Total assets	$	1,716,512
Liabilities and Stockholders Equity
Accounts payable	$	107,000
Dividends payable		20,250
Common stock		940,000
Retained earnings		649,262
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:
1.	Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets:

a.	A sales budget, by month and in total.
	Sales Budget April May June Quarter Budgeted unit Sales 66,400 101,400 51,400 219,200 Selling price per unit 13 13 13 13 Total sales 863,200 1,318,200 668,200 2,849,600

b.	A schedule of expected cash collections from sales, by month and in total.
	Earrings Unlimited Schedule of Expected Cash Collections April May June Quarter February Sales 35,620 35,620 March Sales 376,740 53,820 430,560 April Sales 172,640 604,240 86,320 863,200 May Sales 263,640 922,740 1,186,380 June Sales 133,640 133,640 Total Cash collections 585,000 921,700 1,142,700 2,649,400

c.

A merchandise purchases budget in units and in dollars. Show the budget by month and in total.(Round unit cost of purchases to 1 decimal place.)

Earrings Unlimited Merchandise Purchases Budget April May June Quarter Budgeted Unit Sales 66,400 101,400 51,400 219,200 Add: Desired ending merchandise inventory 40,560 20,560 12,560 12,560 Total Needs 106,960 121,960 63,960 231,760 Less: Beginning Merchandise inventory 26,560 40,560 20,560 26,560 Required purchases 80,400 81,400 43,400 205,200 Unit Cost 4.7 4.7 4.7 4.7 Required dollar purchases 377,880 382,580 203,980 964,440

d.	A schedule of expected cash disbursements for merchandise purchases, by month and in total.
	Earrings Unlimited Budgeted Cash Disbursements for Merchandise Purchases April May June Quarter
	Accounts Payable April Purchases May Purchases June Purchases Total Cash Payments

2.	A cash budget. Show the budget by month and in total. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

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.

Garrison 15e Recheck 2015-01-16

Explanation:

2.

Interest: ($168,000 1% 3 + $0 1% 2) = $(5,040)

3.

Cost of goods sold @ $4.7 per unit = $1,030,240

Commissions @ 4% of sales = $113,984

Advertising ($270,000 3) = $810,000

Rent ($25,000 3) = $75,000

Salaries ($120,000 3) = $360,000

Utilities ($10,500 3) = $31,500

Insurance ($3,700 3) = $11,100

Depreciation ($21,000 3) = $63,000

4.

Inventory: (12,560 units @ $4.7 per unit) = $59,032

Prepaid insurance: ($24,500 $11,100) = $13,400

Property and equipment, net: ($1,020,000 + $66,500 $63,000) = $1,023,500

Accounts payable, purchases: (50% $203,980) = $101,990

Accounts receivable at June 30:
10% May sales of $1,318,200	$	131,820
80% June sales of $668,200		534,560
Total	$	666,380

Retained earnings at June 30:
Balance, March 31	$	649,262
Add net income (Part 3)		349,736
Total		998,998
Less dividends declared		20,250
Balance, June 30	$	978,748