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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

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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-514 per pait. 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 21.600 June (budget) 27,600 Tuly (budget) 41,000 August (budget) 66,600 September (budget 101.600 51.600 31,600 29,600 26,600 The concentration of soles 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 eanings sold in the following month Suppliers are paid sa 80 for a pair of earrings one half or a month's purchases is paid for in the month of purchase, the other hands paid for in the following month All sales are on credit Only 20% or a month sales are collected in the month of sale An additional 70% is collected in the following month and the remainino 100 collected in the second month following sale. Bad debts have been negligible Monthly operating expenses for the company are given below CH 4% of sales Variable: Sales comissions Fixed: Advertising Rent Salaries Utilities Insurance Depreciation $ 280,000 $ 26,000 $ 122.000 5 $1,000 $ 3,500 $ 22,000 Insurance is paid on an annual basis in November of each year The company plans to purchase $20,000 in new equipment during May and $48,000 in new equipment during June, both purchases will be for cash The company declares dividends of $21000 each quarter payable in the first month of the following quarter The company's balance sheet as of March 31 is given below Ches 5 02.00 Assets Cash Accounts receivable (538,640 February sales: 3465,920 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 504,560 122,872 25,000 1.000.000 $ 1,769.432 $ 108,000 21,000 960,000 600412 51,769,437 The company maintains a minimum cash balance of $58000 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 to increments of S1000 at the beginning of each month The interest rate on these loans is 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 $58.000 in cash Required: Prepare a master budget for the three-month period ending June 30 Include the following detailed schedules Che 1 a. A sales budget, by month and in total b. A schedule of expected cash collections, by month and in total CA 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 $58,000 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 oped Complete this question by entering your answers in the tabs below. RGIA Reg 1 Regic Regin Reg 2 Red R4 Prepare a master budget for the three-month period ending June 30 that includes a sales budget, by month and in total Sales Budget April May June Budgeted unt sales Selling price per unit Total sales Complete this question by entering your answers in the tabs below. Req 1A Reg 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 schedule of expected cash collections, by month and in total, Earrings Unlimited Schedule of Expected Cash Collections April May Junie Quarter February Sales March sales April sales May sales Uune sales Total cash collections Complete this question by entering your answers in the tabs below. Req IA Reg 1B Reg 1C Req 10 Reg2 Raga Req4 Prepare a master budget for the three month period ending June 30 that indudes a merchandise purchases budget in units and in dollars. Show the budget by month and in total (Round unit cost to 2 decimal places) Earrings Unlimited Merchandise Purchases Budget April May June Quarter Budgeted unit sales Total needs Required purchases Unit cost Required dollar purchases Reg 16 Reg 10 > GR Complete this question by entering your answers in the tabs below Req IA Reg 18 Reg i Reg 10 Reg 2 Req3 Reg4 Prepare a master budget for the three-month period ending June 30 that includes a schedule of expected cash dhbursements for merchandise purchases, by month and in total Earrings Unlimited Budgeted Cash Disbursements for Merchandise Purchases April May June Quarter Accounts payable April purchases May purchases June purchases Total cash payments April May June Quarter oped Sol Beginning cash balance Add collections from customers Total cash available Less cash disbursements Merchandise purchases Advertising Rent Salarios Commissions Utilities Equipment purchases Dividends pald Total cash disbursements Exceso (deficiency) of cash available over disbursements Financing Borrowings Repayments Interest Total financing Ending each balance ences Earrings Unlimited Budgeted Income Statement For the Three Months Ended June 30 Variable expenses Fixed expenses Earrings Unlimited Budgeted Balance Sheet June 30 Assets Total assets Liabilities and Stockholders' Equity Total liabilities and stockholders equity

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