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

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 a master budget for the upcoming second quarter. 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-$11 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings) 20,200 June (budget) 26,200 July (budget) 40,200 August (budget) 65,200 September (budget) 25,200 January (actual) February (actual) March (actual) April (budget) May (budget) 50,200 30,200 28,200 100,200 The concentration of sales before and during May is due to Mother's 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 $4.10 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. Only 20% of a month's 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: $210,000 $ 19,000 108,000 $7,500 $ 3,100 $ 15, 000 Advertising Rent Salaries Utilities Insurance Depreciation Insurance is paid on an annual basis, in November of each year The company plans to purchase $16,500 in new equipment during May and $41,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,750 each quarter, payable in the first month of the following quarter The company's balance sheet as of March 31 is given below: Assets Cash Accounts receivable ($28,820 February sales; $75,000 $353,760 March sales) Inventory Prepaid insurance Property and equipment (net) Total assets 382,580 106,928 21,500 960,000 1,546,008 Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholders' equity 101,000 15,750 820,000 609,258 1,546,008 The company maintains a minimum cash balance of $51,000. 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 $51,000 in cash 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. Earrings Unlimited Budgeted Cash Disbursements for Merchandise Purchases April May June Quarter ts payable100,200 s 100,200 $ 200,400 April purchases May purchases une purchases Total cash payments100,200 0 200,400 100,200 $ 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 a master budget for the upcoming second quarter. 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-$11 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings) 20,200 June (budget) 26,200 July (budget) 40,200 August (budget) 65,200 September (budget) 25,200 January (actual) February (actual) March (actual) April (budget) May (budget) 50,200 30,200 28,200 100,200 The concentration of sales before and during May is due to Mother's 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 $4.10 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. Only 20% of a month's 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: $210,000 $ 19,000 108,000 $7,500 $ 3,100 $ 15, 000 Advertising Rent Salaries Utilities Insurance Depreciation Insurance is paid on an annual basis, in November of each year The company plans to purchase $16,500 in new equipment during May and $41,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,750 each quarter, payable in the first month of the following quarter The company's balance sheet as of March 31 is given below: Assets Cash Accounts receivable ($28,820 February sales; $75,000 $353,760 March sales) Inventory Prepaid insurance Property and equipment (net) Total assets 382,580 106,928 21,500 960,000 1,546,008 Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholders' equity 101,000 15,750 820,000 609,258 1,546,008 The company maintains a minimum cash balance of $51,000. 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 $51,000 in cash 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. Earrings Unlimited Budgeted Cash Disbursements for Merchandise Purchases April May June Quarter ts payable100,200 s 100,200 $ 200,400 April purchases May purchases une purchases Total cash payments100,200 0 200,400 100,200 $