The first requirement is done and correct, however, I'm having trouble with other requirements. Please help with explanation and which cellsumbers were used to find answers. (I posted this question again because the other one was incorrect)
Chapter 8 Budget Exercise - Earrings Unlimited: 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 as are result of your Managerial Accounting class at Pima College, 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 510 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 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 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 fofowing month. All sales are on credit. Only 20% of a month's saies 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 neglisible. Monthly operating expenses for the company are given below: insurance is paid on an annual basis, in November of each year. Capital Expenditures: The company plans to purchase $16,000 in new equipment during Mar and 540,000 in new equipment during June; both purchases will be for cash. The company declares dividends of 515,000 each quarter. payable in the first month of the following quarter. Chapter 8 Budget Exercise - Earrings Unilmited page 2 af 2 The company's balance sheet as of March 31 is given below: 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 the accumulated interest on the loan and as much of the loan as possible fin increments of $1,000 ), while still retaining at least $50,000 in cash. Aequired: Prepare a master budget for the three-month period ending June 30 . Include the following detailed schedules: 1. a. A sales budget, by month and in total. b. A schedule of expected cash collections, by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandse purchases, by month and in total. 2. 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. 3. A budgeted income statement for the three-month period ending lune 30 . Use the contribution approach. 4. A budgeted balance sheet as of June 30. EARRINGS UNLIMITED Budgets Requirement 1b. Schedule of expected cash collections: EARRINGS UNLIMITED Cash Budget For the Three Months Ending June 30 Hequirement 3: EARRINGS UNLIMITED Budgeted Income Statement For the Three Months Ending June 30 Sales in units Enter the appropriate data in the yellow Sales cells. Your answer for "Net income" will be Variable expenses: Cost of goods sold Commissions Contribution margin Fixed expenses: Advertising Rent Salaries Utitities Insurance Depreciation Net operating income verified. Less interest expense Net income EARRINGS UNLIMITED Budgeted Balance Sheet June 30 Assets Enter the appropriste data in the yellow Cash Accounts recelvable cels. Your answer for "Total assets" will be verified. 98 inventory 99 Prepaid insurance 100 Property and equipment, net 101 Total assets 102 103 Liabillios and Equity 104 Acoounts payable, purchases 105 Dividends payable 106 Cepital stock, no par 107 Retained eamings 108 Total llablatios and equity 109 110 Accounts recelvable at June 30 : 111 May sales 112 June sales 113 Total 114 115 Retained eamings at June 30 : 116 Balance, March 31 117. Add net income ppropriate data in th answer for "Total a: Chapter 8 Budget Exercise - Earrings Unlimited: 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 as are result of your Managerial Accounting class at Pima College, 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 $10 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 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 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 Insurance is paid on an annual basis, in November of each year. Capital Expenditures: 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 company's balance sheet as of March 31 is given below: The company maintains a minimum cash balance of 550,000 , 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 compa yould pay the bank all the accumulated interest on the loan and as much of the loan as possible (in incre (nents of $1,000 ), while still retaining at least $50,000 in cash. Required: Prepare a master budget for the three-month period ending June 30 . Include the following detailed schedules: 1. a. A sales budget, by month and in total. b. A schedule of expected cash collections, by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. 2. 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. 3. A budgeted income statement for the three-month period ending June 30 . Use the contribution approach. 4. A budgeted balance sheet as of june 30. EARRINGS UNLIMITED Budgets April purchases May purchases Juna purchases Total cash disbursements \begin{tabular}{|crrr|} \hline 158,000 & 158,000 & & 316,000 \\ & 160,000 & 160,000 & 320,000 \\ & & 84,000 & 168,000 \\ \hline$268,000 & $318,000 & $244,000 & $820,000 \\ \hline \hline Correctl & Correctl & Correctli & Correct? \end{tabular} Reguirement 2: EARRINGS UNLIMITED Cash Budget For the Three Months Ending June 30 Cash balance, beginning Add recelpts from customers Total cash available Loss disbursements: Merchandise purchases Advertising Rent Salaries Commissions ( 4% of sales) Utilities Equipment purchases Dividends paid Total disbursements Excess (deficiency) of recelpts over disbursements Financing: Borrowings Repayments Interest Total financing Cash balance, ending \begin{tabular}{|cccc} April & May & June & Quarter \\ \hline$74,000 & $50,000 & $40,000 & \\ 436,000 & 695,000 & 865,000 & 1,996,000 \\ \hline 510,000 & 745,000 & 905,000 & \\ \hline \end{tabular} Requirement 3 : EARRINGS UNLIMITED Budgcted Income Statement For the Throe Months Endina June 30 Sales in units Sales Variable expenses: Cost of goods sold Commissions Coneribution margin Fixed expenses: Advertising Rent Salaries Utilites Ingurarice Depreciation Net operating income Less interest expense \begin{tabular}{rr} 8,600,000 & \\ 8,0,000 & 946,000 \\ \hline & 1,204,000 \\ \hline 600,000 & \\ 54,000 & \\ 318,000 & \\ 21,000 & \\ 9,000 & \\ 42,000 & 1,044,000 \\ \hline & 160,000 \\ & 5,100 \\ \hline \end{tabular} 67. Requirement 3: EARRINGS UNLIMITED Budgeted Income Statemert: For the Three Months Endina June 30 70 71 72 73 Sales in units EARRINGS UNLIMITED Budgeted Belance Shect June 30 EARRNAOS UNLMITED Minimum ending cash balance Selling pice 150.000$10 Piesent and foncastyins ofinuritel. Desined ending inventofies (oercentage of next month's ales) Cost of eamings Purchases paid as follows: In month of purchase in following month Collection an sales: Sales collecled cument month Sales coliested following month Sales collected 2nd mooth following 40% Varlable monthly expenes: Saies commisaions (l' of tales) Flxed monthly expenses: Adverating Rent Salaries Utulites Insurance (12 months paid in November) Depreclation Equipment purchased in May Equipmeet purchased in June Dividends deciared each quarter 50% 50% Balance shot at March 21 : Cosh Astets EARRINGS UNUMITED Minimum ending cash balance Selting price $50,000 $10 Recentand foascastsaiesilinunite) Desired ending inventories igercentage 40% 20. of next montb's sales) 21 Cost of earings 22. 23. Purchases pald as follown
