Marias Jewellery distributes "earrings" to several retail establishments found in malls all across the nation. Although the company has only recently hired you as its accountant, no specific budget has been created by the company prior to this quarter. Because the company had a cash flow problem last year, you think a more thorough budget is necessary. You have chosen to create a master budget for the next second quarter since you are skilled at budgeting. You collaborated with other company employees to compile the data listed below in order to finish this budget.

The company offers a variety of earring designs, all of which are offered for the same price of $10 a pair.

Following are actual earring sales for the past three months and projected sales for the following six months:

Due to Mother's Day gifts, there is a concentration of sales before and throughout May.

At the end of each month, there should be enough inventory on hand to cover 40% of the earrings sold the next month. For each pair of earrings they supply, Marias Jewellery pays its suppliers $5. The first half of a month's purchase price is paid in the month of purchase, and the second half is paid in the month after.

All sales money is paid for using credit. In the month of sale, only 30% of sales are collected. The following month sees the collection of an additional 55% of sales made on credit, and the second month after the sale sees the collection of the final 15% of such sales. The company Marias Jewellery has no bad debts.

Monthly operating expenses for the company are given below:

Annual insurance payments are made in November of each year. Each quarter, the corporation declares dividends in the amount of $12,500, which are due in the first month of the subsequent quarter.

The company's balance sheet as of 31 March is given below:

Prepare a master budget for the three-month period ending 30 June. Include the following detailed schedules:

1. a. A sales budget, by month and the three-month period in total.

b. A schedule of expected cash collections, by month and the three-month period in total.

c. A merchandise purchases budget in units and in dollars. Show the budget by month and the three-month period in total.

d. A schedule of expected cash disbursements for merchandise purchases, by month and three three-month period in total.

2. A cash budget. Show the budget by month and in total. Was there any month(s) where Marias Jewellery should have borrowed funds to cover a deficit in the month(s) and if so, how much should Marias Jewellery have borrowed.

3. A budgeted income statement for the three-month period ending 30 June.

4. A budgeted balance sheet as of 30 June.

\begin{tabular}{|l|r|} \hline Variable operating expenses & 4% of sales \\ \hline Fixed operating expenses & \\ \hline Advertising, rent, salaries, utilities & $134,500 \\ \hline Insurance & 3,000 \\ \hline Depreciation & 14,000 \\ \hline \end{tabular} \begin{tabular}{|l|r|} \hline Assets & \\ \hline Cash & 73,000 \\ \hline Accounts receivable (\$45,000 February sales, \$245,000 March sales) & 290,000 \\ \hline Inventory & 70,000 \\ \hline Prepaid insurance & 21,000 \\ \hline Property and equipment & 581,000 \\ \hline Total assets & 1,035,000 \\ \hline Liabilities and equities & \\ \hline Accounts payable & 92,500 \\ \hline Dividends payable & 12,500 \\ \hline Ordinary \$1 shares & 650,000 \\ \hline Retained earnings & 280,000 \\ \hline Total liabilities and equities & 1,035,000 \\ \hline \end{tabular} \begin{tabular}{|l|r|} \hline January (actual) & 25,000 \\ \hline February (actual) & 30,000 \\ \hline March (actual) & 35,000 \\ \hline April (budget) & 72,500 \\ \hline May (budget) & 115,000 \\ \hline June (budget) & 43,000 \\ \hline July (budget) & 25,000 \\ \hline August (budget) & 23,000 \\ \hline September (budget) & 18,000 \\ \hline \end{tabular}