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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 ses many styles of earrings, but all are sold for the same price-513 per pait. Actual sales of earrings for the last three months and budgeted sales for the next six months follow in pairs of earrings 51,400 January (actual) February (actual) March (actual) April (budget) May (budget) 21,400 June (budget) 27,400 July (budget) 41,400 August (budget) 66,00 September buget) 101,400 31. 29.00 The concentration of sales before and during May is due to Mother's Day, Suficient 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 $4.70 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. of sales Variable: Sales costos Fixed Advertising Rent Salaries Utilities Insurance Depreciation $ 270,000 $ 25,000 $ 120,00 3 e, see $ 21,00 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $19,500 in new equipment during May and $47.000 in new equipment during June, both purchases will be for cash. The company declares dividends of $20.250 each quarter payable in the first month of the following quan The company's balance sheet as of March 31 is given below 5 81,00 Accounts receivable ($15,620 February sales; 540,560 March sales Inventory Prepaid insurance Property and equipment (net) Total asut Liabilities and Stockholders' Equity Accounts payable Dividends payable Connon stock Betained earnings Total lilities and stockholders' equity 66,10 124,832 24,500 1, 2, $ 1,716,512 5 17. $ 1,716,512 The company maintains a minimum cash balance of $57000. Al 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 $100 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 S1000, while still retaining at least $57000 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 CA merchandise purchases budget in units and in dolars. Show the budget by month and in total d Aschedule 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 main cash balance of $57000 3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach 4. A budgeted balance sheet as of Mine 30

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