The company's monthly selling and administrative expenses are given below: Variable: Sales commissions 4% of sales Fixed: Advertising $212,000 Rent 20,000 Wages and salaries 110,800 Utilities 8,600 Insurance 3,800 Depreciation 18,000 All selling and administrative expenses are paid during the month, in cash, with the exception ofdepreciation and insurance. Insurance is paid on an annual basis, in November of each year. The company plans to purchase $17,600 in new equipment during May and $44,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $15,800 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: Assets Cash $ 78,000 Accounts receivable ($30,000 February sales; $344,000 March sales) 374,000 Inventory 110,400 Prepaid insurance 26,600 Fixed assets, net of depreciation 970,000 Total assets $1,559,000 Liabilities and Shareholders' Equity Accounts payable 5 106,800 Dividends payable 15,800 Common shares 840,000 Retained earnings 596,400 Total liabilities and shareholders' equity $1,559,000 Case 9-27 Master Budget with Supporting Schedules [L02] Knockoffs Unlimited, a nationwide distributor of lowcost imitation designer necklaces, has an exclusive franchise on the distribution of the necklaces, and sales have grown so rapidly over the past few years that it has become necessary to add new members to the management team. To date, the company's budgeting practices have been inferior, and at times the company has experienced a cash shortage. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are eager to make a favourable impression on the president and have assembled the information below. The necklaces are sold to retailers for $10 each. Recent and forecast sales in units are as follows: January (actual) 22,000 June 54,000 February (actual) 30,000 July 34,000 March (actual) 43,000 August 32,000 April 69,000 September 29,000 May 103,000 The large buildup in sales before and during May is due to Mother's Day. Ending inventories should be equal to 40% of the next month's sales in units. The necklaces cost the company $4 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% 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 month's sales are collected by monthend. 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. The company's monthly selling and administrative expenses are given below: The company wants a minimum ending cash balance each month of $50,000. All borrowing is done at the beginning of the month, with any repayments made at the end of the month. The interest rate on these loans is 1% per month and must be paid at the end of each month based on the outstanding loan balance for that month. Required: 1. Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: a. A sales budget by month and in total. Budgeted sales in units Selling price per unit Total sales b. A schedule of expected cash collections from sales, by month and in total. February sales March sales April sales May sales Question 3 - A7 - Connect X Homework Help - Q&A from Or x + C ezto.mheducation.com/ext/map/index.html?_con=con&external_br wser %252Fnewconnect.mheducation.com%252F#/... ( * G * 14> Update : Press (fn) F| to exit full screen Maps D2L smith learning solus Events - Glean Organizational be... Ma A7 i Saved Help Save & Exit Submit b. A schedule of expected cash collections from sales, by month and in total. 3 KNOCKOFFS UNLIMITED Schedule of Expected Cash Collections April May June Quarter February sales 10 points March sales April sales May sales June sales eBook Total cash collections References c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. KNOCKOFFS UNLIMITED Merchandise Purchases Budget April May June Quarter Budgeted sales in units Total needs Required unit purchases Unit cos Required dollar purchases Mc Graw HillChrome File View History Bookmarks Profiles Tab Window Help Q 8 @ Thu Mar 16 10:49 PM Question 3 - A7 - Connect X Homework Help - Q&A from Or x + C ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.com%252F#/... ( * G * 0 Update : Maps D2L smith learning solus Events - Glean Organizational be... Managerial Accou A7 i Saved Help Save & Exit Submit d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. 3 KNOCKOFFS UNLIMITED Schedule of Expected Cash Disbursements April May June Quarter 10 March purchases points April purchases May purchases eBook June purchases References Total cash disbursements 2. A cash budget. Show the budget by month and in total. (Round your intermediate calculations and final answers to the nearest whole dollar. Also, round down your interest calculations to the next whole dollar amount. Cash deficiency, repayments and interest should be indicated by a minus sign. Do not leave any empty spaces; input a 0 wherever it is required.) KNOCKOFFS UNLIMITED Cash Budget For the Three Months Ending June 30 April May June Quarter Cash balance, beginning Add receipts from customers Total cash available Less disbursements: Purchase of inventory Advertising Mc Graw HillQuestion 3 - A7 - Connect * *Homework Help - Q&A from Or x + Diana Reale 3D + specials ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.com% BE COOL Maps D21 smith learning solus Events - Glean Organizational be... Managerial Accou A7 i Saved Help Save & Exit Submit 2. A cash budget. Show the budget by month and in total. (Round your intermediate calculations and final answers to the nearest 3 whole dollar. Also, round down your interest calculations to the next whole dollar amount. Cash deficiency, repayments and interest should be indicated by a minus sign. Do not leave any empty spaces; input a 0 wherever it is required.) KNOCKOFFS UNLIMITED 10 Cash Budget points For the Three Months Ending June 30 April May June Quarter Cash balance, beginning Add receipts from customers eBook Total cash available Less disbursements References Purchase of inventory Advertising Rent Salaries and wages Sales commissions Utilities Dividends paid Equipment purchases Total disbursements Excess (deficiency) of receipts over disbursements Financing: Borrowings Repayments Interest Total financing Cash balance, ending Mc Graw HillReferences 3. A budgeted income statement for the three-month period ending June 30. Use the variable costing approach. Variable expenses: 4. A budgeted balance sheet as of June 30. Total assets Liabilities and Shareholders' Equity Total liabilities and shareholders' equity