The company's balance sheet as of March 31 is given below: $ 87,000 Assets Cash Accounts receivable ($ 48,620 February sales; $579, 360 March sales) Inventory Prepaid insurance Property and equipment (net) Total assets Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholders' equity 627,980 143,312 27,500 1,080,000 $ 1,965,792 $ 113,000 24,750 1,060,000 768,042 $ 1,965,792 The company maintains a minimum cash balance of $63,000. 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 $63,000 in cash. 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$17 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) February (actual) March (actual) April (budget) May (budget) 22,600 28,600 42,600 67,600 102,600 June (budget) July (budget) August (budget) September (budget) 52,600 32,600 30, 600 27,600 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 $5.30 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: 4% of sales Variable: Sales commissions Fixed: Advertising Rent Salaries Utilities Insurance Depreciation $ 330,000 $ 31,000 $ 132,000 $ 13,500 $ 4,300 $ 27,000 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $22,500 in new equipment during May and $53,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $24,750 each quarter, payable in the first month of the following quarter. The company's balance sheet as of March 31 is given below: The company maintains a minimum cash balance of $63,000. 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 $63,000 in cash. Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules: Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Req 1C Req 1D Reg 2 Reg 3 Req 4 Prepare a master budget for the three-month period ending June 30 that includes 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 $63,000. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Earrings Unlimited Cash Budget For the Three Months Ending June 30 April May June Quarter Beginning cash balance Add collections from customers Total cash available 0 0 0 0 Less cash disbursements: Merchandise purchases Advertising Rent Salaries Commissions Utilities Equipment purchases Dividends paid Total cash disbursements 0 0 0 0 Excess (deficiency) of cash available over disbursements Financing: Borrowings T 0 Repayments 10 Interest Total financing 0 0 0 0 Ending cash balance $ 0 $ 0 $ 0 $ 01 Req 1A Req 1B Req 1C Req 1D Req 2 Req3 Req 4 Prepare a master budget for the three-month period ending June 30 that includes a budgeted income statement for the three- month period ending June 30. Use the contribution approach. Earrings Unlimited Budgeted Income Statement For the Three Months Ended June 30 Variable expenses: Fixed expenses: Prepare a master budget for the three-month period ending June 30 that includes a budgeted balance sheet as of June 30. Earrings Unlimited Budgeted Balance Sheet June 30 Assets Total assets Liabilities and Stockholders' Equity Total liabilities and stockholders' equity $ Budgeted unit sales Selling price per unit Sales Budget April May 67,600 102,600 $ 171 $ 17 1,149.200 $ 1,744,200 June 52,600 $ 17 $ 894,200 Quarter 222,800 $ 17 $ 3,787,600 Total sales Earrings Unlimited Schedule of Expected Cash Collections April May June $ 48,260 506,940 72,420 229,840 804,440 114,920 348,840 1,220,9401 178,840 $ 785,040 $ 1,225,700 $ 1,514,700 February sales March sales April sales May sales June sales Total cash collections ol Quarter $ 48,260 579,360 1,149,200 1,569,780 178,840 $ 3,525,440 Earrings Unlimited Merchandise Purchases Budget April May Budgeted unit sales 67,600 102,600 Add: Desired ending merchandise inventory 41,040 21,040 Total needs 108,640 123,640 Less: Desired ending merchandise inventory 27,040 | 41,040 Required purchases 81,600 82,600 Unit cost $ 5.30 $ 5.30 Required dollar purchases $ 432,480 $ 437,780 June 52,600 13,040 65,640 21,040 44,600 5.30 236,380 Quarter 222,800 13,0401 235,840 27,040 208,800 $ 5.30 $ 1,106,640 $ $ Earrings Unlimited Budgeted Cash Disbursements for Merchandise Purchases April May June Quarter Accounts payable $ 113,000 $ 113,000 April purchases 216,240 216,240 432,480 May purchases 218,890 218,890 437,780 June purchases | 118,190 118,190 Total cash payments $ 329,240 $ 435,130 $ 337,080 1,101,450