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-$11 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) 20, 208 June (budget) 50, 208 February (actual) 26, 208 July (budget) 30,208 March (actual) 40, 208 August ( budget) 28, 208 April (budget) 65, 200 September (budget) 25, 208 May (budget) 180, 209 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 $4.10 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 Fixed: Advertising $ 210,090 Rent Salaries $ 108, 090 Utilities $ 7,500 Insurance $ 3,109 Depreciation $ 15,890 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $16,500 in new equipment during May and $41,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,750 each quarter, payable in the first month of the following quarter.The company's balance sheet as of March 31 is given below: Assets Cash $ 75, 090 Accounts receivable ($28, 820 February sales; $353, 760 March sales) 382,580 Inventory 186,928 Prepaid insurance 21,508 Property and equipment (net) 960, 808 Total assets $ 1,546, 208 Liabilities and Stockholders' Equity Accounts payable $ 181, 209 Dividends payable 15,750 Common stock 820, 208 Retained earnings 609,258 Total liabilities and stockholders' equity $ 1,546, 908 The company maintains a minimum cash balance of $51,000. 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 $51,000 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 $51,000. 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.Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req 1D Reg 2 Reg 3 Reg 4 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 Cash S 75,000 Accounts receivable 181,940 inventory (Prepaid insurance Property and equipment, net 860,000 Total assets $ 1,216,940 Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholders' equity $ 0