(PLEASE DO IN EXCEL AND SHOW WORK!!! Thank you!!)

The owner of Northwind Unlimited, Inc. has been concerned about the shortage of cash the company experiences during various times of the year. As a recent graduate of a highly regarded business school, you have been charged with the task of developing a budget that will allow the company to get a better understanding of its cash needs during the year. You have decided to prepare a master budget for the upcoming second quarter. The accounting department and other areas of the company have provided you with the following information.

The company sells many styles of pens, but all are sold for the same price$10 each. Actual sales of pens for the last three months and budgeted sales for the next six months follow:

January (actual) 20,000 June (budget) 50,000

February (actual) 26,000 July (budget) 30,000

March (actual) 40,000 August (budget) 28,000

April (budget) 65,000 September (budget) 25,000

May (budget) 100,000

The company experiences peak sales during May. The production manager prefers that inventory should be on hand at the end of each month to supply 40% of the pens sold in the following month.

Suppliers are paid $4 for each pen. 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. 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 $200,000

Rent $ 18,000

Salaries $106,000

Utilities $ 7,000

Insurance $ 3,000

Depreciation $ 14,000

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

The company plans to purchase $16,000 in new equipment during 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.

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

Assets

Cash $74,000

Accounts receivable ($26,000 February sales;

$320,000 March sales) 346,000

Inventory 104,000

Prepaid insurance 21,000

Property and equipment (net) 950,000

Total assets $1,495,000

Liabilities and Stockholders Equity

Accounts payable $100,000

Dividends payable 15,000

Common stock 800,000

Retained earnings 580,000

Total liabilities and stockholders equity $1,495,000

The company maintains a minimum cash balance of $50,000. 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 $50,000 in cash.

Required (using an excel spreadsheet):

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

A sales budget, by month and in total.

A schedule of expected cash collections, by month and in total.

A merchandise purchases budget in units and in dollars. Show the budget by month and in total.

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

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 $50,000.

A budgeted income statement for the three-month period ending June 30. Use the contribution approach.

A budgeted balance sheet as of June 30.