The large buildup in sales before and during June is due to Father?s Day. Ending inventories are supposed to equal 90% of the next month?s sales in units. The ties cost the company $5 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 25% of a month?s sales are collected by month-end. An additional 50% is collected in the following month, and the remaining 25% is collected in the second month following sale. Bad debts have been negligible. The company?s monthly selling and administrative expenses are given below: (See Attached) All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Land will be purchased during May for $25,000 cash. The company declares dividends of $12,000 each quarter, payable in the first month of the following quarter. The company?s balance sheet at March 31 is given below: (See Attached) The company has an agreement with a bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. 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 $10,000 in cash. Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: 4. A budgeted balance sheet as of June 30.

Student Name: Class: Case 08-29 CRAVAT SALES COMPANY Budgets April May June Quarter May June Quarter 1a. Sales budget: Budgeted sales in units Selling price per unit Total sales 1b. Schedule of expected cash collections: February sales March sales April sales May sales June sales Total cash collections 1c. Merchandise purchases budget: Budgeted sales in units Add budgeted ending inventory Total needs Less beginning inventory Required unit purchases Unit cost Required dollar purchases 1d. Budgeted cash disbursements for merchandise purchases: March purchases April purchases May purchases June purchases Total cash payments 2. CRAVAT SALES COMPANY Cash Budget For the Three Months Ending June 30 April Cash balance, beginning Add receipts from customers Total cash available Less disbursements: Purchase of inventory Sales commissions Salaries and wages Utilities Miscellaneous Dividends paid Land purchases Total disbursements Excess (deficiency) of receipts over disbursements Financing: Borrowings Repayments Interest Total financing Cash balance, ending 3. CRAVAT SALES COMPANY Budgeted Income Statement For the Three Months Ended June 30 Sales in units Sales Variable expenses: Cost of goods sold Commissions Contribution margin Fixed expenses: Salaries and wages Utilities Insurance expired Depreciation Miscellaneous Net operating income Less interest expense Net income 4. CRAVAT SALES COMPANY Budgeted Balance Sheet June 30 Assets Cash Accounts receivable Inventory Unexpired insurance Fixed assets, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable, purchases Dividends payable Loans payable, bank Capital stock, no par Retained earnings Total liabilities and equity Accounts receivable at June 30: May sales June sales Total Retained earnings at June 30: Balance, March 31 Add net income Total Less dividends declared Balance, June 30 Given Data Case 08-29: CRAVAT SALES COMPANY Minimum ending cash balance Selling price $10,000 $8 Recent and forecast sales (in units): January (actual) February (actual) March (actual) April May June July August September 20,000 24,000 28,000 35,000 45,000 60,000 40,000 36,000 32,000 Desired ending inventories (percentage of next month's sales) Cost of earrings 90% $5 Purchases paid as follows: In month of purchase In following month 50% 50% Collection on sales: Sales collected current month Sales collected following month Sales collected 2nd month following 25% 50% 25% Variable monthly expenses: Sales commissions (per tie) $1.00 Fixed monthly expenses: Wages and salaries Utilities Insurance Depreciation Miscellaneous $22,000 $14,000 $1,200 $1,500 $3,000 Land purchased in May Dividends declared each quarter $25,000 $12,000 Balance sheet at March 31: Assets Cash Accounts receivable February sales March sales Inventory (31,500 units) Prepaid insurance Fixed assets, net of depreciation Total assets $14,000 $48,000 168,000 Liabilities and Stockholders' Equity Accounts payable Dividends payable Capital stock Retained earnings Total liabilities and stockholders' equity Agreement with Bank: Borrowing increments Maximum borrowing amount Interest rate per month Repayment increments Total of interest paid each quarter Required minimum cash balance 216,000 157,500 14,400 172,700 $574,600 $85,750 12,000 300,000 176,850 $574,600 $1,000 $40,000 1% $1,000 100% $10,000