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 comprehensive budgets for the upcoming second quarter in order to show management the benefits that can be gained from an integrated budgeting program. 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):

January (actual)	20,000	June (budget)	50,000
February (actual)	26,000	July (budget)	30,000
March (actual)	40,000	August (budget)	28,000
April (budget)	65,000	September (budget)	25,000
May (budget)	100,000

The concentration of sales before and during May is due to Mothers 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 months purchases is paid for in the month of purchase; the other half is paid for 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 months 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	$	200,000
Rent	$	18,000
Salaries	$	106,000
Utilities	$	7,000
Insurance	$	3,000
Depreciation	$	14,000

Insurance is paid on an annual basis, in November of each year.

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.

A listing of the companys ledger accounts as of March 31 is given below:

Assets
Cash	$	74,000
Accounts receivable ($26,000 February sales; $320,000 March sales)		346,000
Inventory		104,000
Prepaid insurance		21,000
Property and equipment (net)		950,000
Total assets	$	1,495,000
Liabilities and Stockholders Equity
Accounts payable	$	100,000
Dividends payable		15,000
Common stock		800,000
Retained earnings		580,000
Total liabilities and stockholders equity	$	1,495,000

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 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 $50,000 in cash.

Required:
1.	I have completed the sales budget, expected collections etc need help with the accounts receivable and retained earnings sheet. Thanks

Requirement 3: EARRINGS UNLIMITED Budgeted Income Statement EARRINGS UNLIMITED Budgeted Balance Sheet June 30 Assets Cash $94,700500,00048,00012,000964,000$1,618,700Correct! Accounts receivable Inventory Prepaid insurance Property and equipment, net Total assets Liabilities and Equity Accounts payable, purchases Dividends payable Capital stock, no par Retained earnings Total liabilities and equity $84,00015,000800,000719,700$1,618,700Correct! 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 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 \begin{tabular}{|c|c|c|c|c|} \hline \multicolumn{5}{|c|}{\begin{tabular}{l} EARRINGS UNLIMITED \\ Cash Budget \\ For the Three Months Ending June 30 \end{tabular}} \\ \hline & April & May & June & Quarter \\ \hline Cash balance, beginning & $100,000 & $50,000 & $50,000 & $74,000 \\ \hline Add receipts from customers & 158,000 & 695,000 & 865,000 & 1,996,000 \\ \hline Total cash available & 510,000 & 745,000 & 915,000 & 2,070,000 \\ \hline \multicolumn{5}{|l|}{ Less disbursements: } \\ \hline Merchandise purchases & 258,000 & 318,000 & 244,000 & 820,000 \\ \hline Advertising & 26,000 & 40,000 & 20,000 & 86,000 \\ \hline Rent & 200,000 & 200,000 & 200,000 & 600,000 \\ \hline Salaries & 18,000 & 18,000 & 18,000 & 54,000 \\ \hline Commissions ( 4% of sales) & 106,000 & 106,000 & 106,000 & 318,000 \\ \hline Utilities & 7,000 & 7,000 & 7,000 & 21,000 \\ \hline Equipment purchases & 0 & 16,000 & 40,000 & 56,000 \\ \hline Dividends paid & 15,000 & 0 & 0 & 15,000 \\ \hline Total disbursements & 630,000 & 705,000 & 635,000 & 1,970,000 \\ \hline \multicolumn{5}{|l|}{ Excess (deficiency) of receipts } \\ \hline over disbursements & (120,000) & 40,000 & 280,000 & 100,000 \\ \hline \multicolumn{5}{|l|}{ Financing: } \\ \hline Borrowings & 170,000 & 10,000 & 0 & 180,000 \\ \hline Repayments & 0 & 0 & (180,000) & (180,000) \\ \hline Interest & 0 & 0 & (5,300) & (5,300) \\ \hline Total financing & 170,000 & 10,000 & (185,300) & (5,300) \\ \hline \multirow[t]{2}{*}{ Cash balance, ending } & $50,000 & $50,000 & $94,700 & $94,700 \\ \hline & Correct! & Correct! & Correct! & Correct! \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|} \hline & April & May & June & Quarter \\ \hline \multicolumn{5}{|l|}{ Requirement 1a. Sales budget } \\ \hline Budgeted sales in units & 65,000 & 100,000 & 50,000 & 215,000 \\ \hline Selling price per unit & $10 & $10 & $10 & $10 \\ \hline \multirow[t]{2}{*}{ Total sales } & $650,000 & $1,000,000 & $500,000 & $2,150,000 \\ \hline & Correct! & Correct! & Correct! & Correct! \\ \hline \multicolumn{5}{|c|}{ Requirement 1b. Schedule of expected cash collections: } \\ \hline February sales & $26,000 & & & $26,000 \\ \hline March sales & 280,000 & 40,000 & & 320,000 \\ \hline April sales & 130,000 & 455,000 & 65,000 & 650,000 \\ \hline May sales & & 200,000 & 700,000 & 900,000 \\ \hline June sales & & & 100,000 & 100,000 \\ \hline \multirow[t]{2}{*}{ Total cash collections } & $436,000 & $695,000 & $865,000 & $4,996,000 \\ \hline & Correct! & Correct! & Correct! & Try again! \\ \hline \multicolumn{5}{|c|}{ Requirement 1c. Merchandise purchases budget: } \\ \hline Budgeted unit sales & 65,000 & 100,000 & 50,000 & 215,000 \\ \hline Add desired ending inventory & 40,000 & 20,000 & 12,000 & 12,000 \\ \hline Total needs & 105,000 & 120,000 & 62,000 & 227,000 \\ \hline Less beginning inventory & (26,000) & (40,000) & (20,000) & (26,000) \\ \hline Required purchases in units & 79,000 & 80,000 & 42,000 & 201,000 \\ \hline Unit cost & $4 & $4 & $4 & $4 \\ \hline \multirow[t]{2}{*}{ Required dollar purchases } & $316,000 & $320,000 & $168,000 & $804,000 \\ \hline & Correct! & Correct! & Correct! & Correct! \\ \hline \multicolumn{5}{|c|}{ Requirement 1d. Budgeted cash disbursements for merchandise purchases: } \\ \hline Accounts payable & 100,000 & & & 100,000 \\ \hline April purchases & 158,000 & 158,000 & & 316,000 \\ \hline May purchases & & 160,000 & 160,000 & 320,000 \\ \hline June purchases & & & 84,000 & 84,000 \\ \hline Total cash disbursements & $258,000 & $318,000 & $244,000 & $820,000 \\ \hline \end{tabular}