The company sells many styles of earrings, but all are sold for the same price, i.e. $12 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):

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 45% of the earrings sold in the following month.

Suppliers are paid $5 for a pair of earrings. One-half of a months purchases is paid for in the month of purchase, and 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.

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

The company plans to purchase $20 000 in new equipment during May and $42 000 in new equipment during June, and both will be for cash. The company declares dividends of $15 000 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.

The company maintains a minimum cash balance of $60 000. All borrowing is done at the beginning of a month, and 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 $60 000 in cash.

You are required to provide all the supporting schedules that are needed to compile the budgeted balance sheet for the three month period ending June 30 as follows:

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 $60 000.

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

A budgeted balance sheet as at June 30.

This is my working

I think I did something wrong with the cash budget and income statement, therefore my total asset does not balance with total liabilities and equity.

Could you please check it for me?

5% of sales Variable: Sales commissions Fixed: Advertising Rent Salaries Utilities Insurance Depreciation $210 000 22 000 110 000 8 000 5 000 15 000 Assets Cash $70 000 Accounts receivable 436 800 ($33 600 February sales, $403 200 March sales) Inventory 148 500 Prepaid insurance 25 200 Property and equipment (net) 903 500 Total assets $1 584 000 Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholders' equity $125 000 15 000 850 000 594 000 $1 584 000 A B D E April May 66000 12 June 100000 12 quarter 55000 12 221000 792000 1200000 660000 2652000 1 Sales budget 2 3 Budgeted unit sales 4 Selling price per unit 5 Total sales 6 7 Collection from customers 8 9 February sales 10 March sales 11 April sales 12 May sales 13 June sales 14 Total cash collection 15 April May June Quarter 33600 352800 50400 158400 554400 79200 240000 840000 132000 $ 544,800.00 $ 844,800.00 $ 1,051,200.00 $ 2,440,800.00 26 Cash disbursements for merchandise purchases: 27 28 Accounts payable 29 April purchases 30 May purchases 31 June purchases 32 Total cash payments 33 April May June Quarter $ 132,000.00 $ 203,250.00 $ 203,250.00 $ 199,375.00 $ 199,375.00 $ 111,625.00 $ 335,250.00 $ 402,625.00 $ 311,000.00 $ 1,048,875.00 Cash Budget: April May June Quarter $ 70,000.00 $ 60,950.00 $ 73,125.00 $ 70,000.00 $ 544,800.00 $ 844,800.00 $1,051,200.00 $ 2,440,800.00 $ 614,800.00 $ 905,750.00 $1,124,325.00 $ 2,644,875.00 Beginning cash balance Add collections from customers Total cash available Less cash disbursements Merchandise purchases 1 Advertising 2 Rent 3 Salaries 4 Commissions 5 Utilities 6 Equipment purchases 7 Dividends paid 8 Total cash disbursements 9 Excess of cash available over disbursements 50 Financing 51 Borrowings 52 Repayments 53 Interest 54 Total financing 55 Ending cash balance $ 335,250.00 $ 402,625.00 $ 311,000.00 $ 1,048,875.00 210000 210000 210000 630000 22000 22000 25000 66000 110000 110000 110000 330000 39600 60000 33000 132600 8000 8000 8000 24000 0 20000 42000 62000 15000 0 0 15000 $ 739,850.00 $ 832,625.00 $ 736,000.00 $ 2,308,475.00 $ (125,050.00) $ 73,125.00 $ 388,325.00 $ 336,400.00 186000 0 0 186000 60,950.00 $ 0 0 186000 0 -186000 -186000 0 -5580 -5580 0 -191580 -5580 73,125.00 $ 196,745.00 $ 330,820.00 $ 2652000 1105000 132600 1237600 1414400 Budgeted income statement for the quarter Sales Variable expenses: Cost of good sold (221000*5) Commission 2 Contribution Margin 3 Fixed expenses: 4 Advertising 5 Rent 56 Salaries 57 Utinities 58 Insurance 59 Depreciation 70 Net operation income 71 Interest expense 72 Net income 73 630000 66000 330000 24000 15000 45000 1110000 304400 5580 298820 Sheet1 + 73 74 BUGETED BALANCE SHEET 75 ASSETS: 76 Cash 77 Account receivable 78 Inventory 79 Prepaid insurance 80 Property and equipment -net 81 Total assets 82 LIABILITIES AND EQUITY 83 Account payable 84 Dividend payable 85 Capital stock 86 Retained earnings 87 Total liabilities and equity 88 89 $ 330,820.00 648000 72000 10200 920500 1981520 $ 111,625.00 15000 850000 877820 $ 1,854,445.00