Project assigment. Please let me know if you are able to help with this

Project A Case 9-30

April May June Quarter

Collections

April May June Quarter
Budgeted unit sales

April May June Quarter

April May June Quarter

EARRINGS UNLIMITED

– 0

Commissions – 0 – 0

– 0

Advertising – 0
Rent – 0
Salaries – 0
Utilities – 0

– 0

– 0 – 0

– 0

– 0

– 0

EARRINGS UNLIMITED

JUNE 30
Cash

assets

Total

Total

PROJECT A – Case 9-30

Student Name:

SALES BUDGET:

April

May

June

Quarter

Budgeted unit sales

Selling price per unit

Total Sales

SCHEDULE OF EXPECTED CASH COLLECTIONS:

February sales

March sales

April sales

May sales

June sales

Total

Cash

MERCHANDISE PURCHASES BUDGET:

Add desired ending inventory

Total needs

Less beginning inventory

Required purchases

Cost of purchases @ $4 per unit

BUDGETED CASH DISBURSEMENTS FOR MERCHANDISE PURCHASES:

Accounts payable

April purchases

May purchases

June purchases

Total cash payments

EARRINGS UNLIMITED

CASH BUDGET

FOR THE THREE MONTHS ENDING Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper

JUNE 30

Cash balance

Add collections from customers

Total cash available

Less Disbursements

Merchandise purchases

Advertising

Rent

Salaries

Commissions

Utilities

Equipment purchases

Dividends paid

Total Disbursements

Excess (deficiency) of receipts

over disbursements

Financing:

Borrowings

Repayments

Interest

Total financing

Cash balance, ending

BUDGETED INCOME STATEMENT

FOR THE THREE MONTHS ENDED JUNE 30

Sales

– 0

Variable expenses:

Cost of goods sold

Contribution Margin

Fixed expenses:

Insurance

Depreciation

Net operating income

Interest expense

Net income

BUDGETED BALANCE SHEET

Assets:

Accounts receivable (see below)

Inventory

Prepaid insurance

Property and equipment, net

Total

Liabilities and Stockholders’ Equity

Accounts payable, purchases

Dividends payable

Capital stock

Retained earnings (see below)

Total liabilities and stockholders’ equity

Accounts receivable at June 30:

May sales x ?%

June sales x ?%

Retained earnings at June 30:

Balance, March 31

Add net income

Less dividends declared

Balance, June 30

Sheet2

Sheet3

COURSE PROJECT A INSTRUCTIONS

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):

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 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:

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 company’s ledger accounts as of March 31 is given below:

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:

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

· 1.

· a. A sales budget, by month and in total.

· b. A schedule of expected cash collections from sales, 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 $50,000.

· 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.