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$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)	20,600	June (budget)	50,600
February (actual)	26,600	July (budget)	30,600
March (actual)	40,600	August (budget)	28,600
April (budget)	65,600	September (budget)	25,600
May (budget)	100,600

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 $5 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, with no discount, and payable within 15 days. The company has found, however, that 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	$	199,400
Rent	$	17,400
Salaries	$	105,400
Utilities	$	6,400
Insurance	$	2,400
Depreciation	$	13,400

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

The company plans to purchase $15,600 in new equipment during May and $39,400 in new equipment during June; both purchases will be for cash. The company declares dividends of $12,000 each quarter, payable in the first month of the following quarter.

A listing of the company's ledger accounts as of March 31 is given below:

Assets			Liabilities and Stockholders' Equity
Cash	$	130,200	Accounts payable	$	126,500
Accounts receivable ($29,260 February sales; $357,280 March sales)		386,540	Dividends payable		12,000
Inventory		131,200	Capital stock		860,000
Prepaid insurance		21,600	Retained earnings		586,000
Property and equipment (net)		914,960
Total assets	$	1,584,500	Total liabilities and stockholders' equity	$	1,584,500

The company maintains a minimum cash balance of $60,000. 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 $60,000 in cash.

Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets:

Requirement 1:
(a)	A sales budget, by month and in total. (Omit the "$" sign in your response.)

	April		May		June		Quarter
Budgeted sales in units
Selling price per unit	$		$		$		$
Total sales	$		$		$		$

(b)	A schedule of expected cash collections from sales, by month and in total. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

	April		May		June		Quarter
February sales	$		$		$		$
March sales
April sales
May sales
June sales
Total cash collections	$		$		$		$

(c)	A merchandise purchases budget in units and in dollars. (Omit the "$" sign in your response.)

	April		May		June		Quarter
Required unit purchases
Required dollar purchases	$		$		$		$

(d)	A schedule of expected cash disbursements for merchandise purchases, by month and in total. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

	April		May		June		Quarter
Accounts payable	$		$		$		$
April purchases
May purchases
June purchases
Total cash payments	$		$		$		$

Requirement 2:

A cash budget. Show the budget by month and in total. (Leave no cells blank - be certain to enter "0" wherever required. Deficiencies, repayments and interest should be preceded by a minus sign when appropriate. Total financing should be preceded by a minus sign when it consist of repayments and interest. Omit the "$" sign in your response.)

Earrings Unlimited Cash Budget For the Three Months Ending June 30
	April		May		June		Quarter
Total cash available	$		$		$		$
Less disbursements:
(Click to select)Merchandise purchasesRepaymentsBorrowingsCashInterest
(Click to select)InterestSalesRepaymentsAdvertisingCash
(Click to select)CashLand purchasesAccounts payablePurchase of inventoryRent
(Click to select)InterestSalesSalariesRepaymentsBorrowings
(Click to select)CommissionsSalesCashInterestBorrowings
(Click to select)UtilitiesCashInterestRepaymentsBorrowings
(Click to select)InterestEquipment purchasesRepaymentsAccounts payableSales
(Click to select)BorrowingsRepaymentsAccounts payableSalesDividends paid
Total disbursements
Excess (deficiency) of receipts over disbursements
Financing:
(Click to select)SalesMiscellaneousBorrowingsAccounts payableSales commissions
(Click to select)Salaries and wagesSalesCashRepaymentsDividends paid
(Click to select)Purchase of inventoryInterestLand purchasesAccounts payableCash
Total financing
Cash balance, ending	$		$		$		$

Requirement 3:

A budgeted income statement for the three-month period ending June 30. Use the contribution approach. (Input the amount as positive value. Omit the "$" sign in your response.)

Earrings Unlimited Budgeted Income Statement For the Three Months Ended June 30
(Click to select)Accounts receivableDividends payableAccounts payableCashCost of goods soldCommissionsSalesRetained earnings			$
Variable expenses:
(Click to select)SalariesDepreciationInsuranceUtilitiesAdvertisingCommissionsRentCost of goods sold	$
(Click to select)DepreciationUtilitiesRentCost of goods soldSalariesInsuranceCommissionsAdvertising
Contribution margin
Fixed expenses:
(Click to select)SalariesDepreciationUtilitiesInsuranceCost of goods soldRentCommissionsAdvertising
(Click to select)InsuranceCost of goods soldRentAdvertisingUtilitiesDepreciationCommissionsSalaries
(Click to select)Cost of goods soldCommissionsSalariesAdvertisingDepreciationUtilitiesRentInsurance
(Click to select)SalariesDepreciationCommissionsCost of goods soldAdvertisingUtilitiesInsuranceRent
(Click to select)AdvertisingCost of goods soldDepreciationInsuranceRentSalariesCommissionsUtilities
(Click to select)DepreciationInsuranceSalariesCommissionsCost of goods soldUtilitiesAdvertisingRent
(Click to select)Net operating incomeNet operating loss
(Click to select)LessAdd: (Click to select)Sales commissionsRentInsuranceSalariesPrepaid insuranceUtilitiesInterest expenseDepreciation
(Click to select)Net incomeNet loss			$

Requirement 4:

A budgeted balance sheet as of June 30. (Omit the "$" sign in your response.)

Earrings Unlimited Budgeted Balance Sheet June 30
Assets			Liabilities and Stockholders' Equity
(Click to select)CashRetained earningsDividends payableAccounts payable purchasesCapital stock	$		(Click to select)Property and equipment, netAccounts payable purchasesInventoryCashAccounts receivable	$
(Click to select)Accounts payable purchasesCapital stockRetained earningsDividends payableAccounts receivable			(Click to select)CashDividends payableInventoryProperty and equipment, netAccounts receivable
(Click to select)Dividends payableInventoryCapital stockAccounts payable purchasesRetained earnings			(Click to select)Property and equipment, netPrepaid insuranceCashInventoryCapital stock
(Click to select)Accounts payable purchasesRetained earningsPrepaid insuranceDividends payableCapital stock			(Click to select)Retained earningsProperty and equipment, netCashPrepaid insuranceInventory
(Click to select)Dividends payableRetained earningsAccounts payable purchasesProperty and equipment, netCapital stock
Total assets	$		Total liabilities and Stockholders' equity	$