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1. a. A sales budget, by month and in total. b. A schedule of expected cosh collections, by month and in total. C.A merchandise purchases budget in units and in dollers. 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. Decermine any borrowing that would be needed to maintain the min cosh balance of S68.000. 3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.

1. a. A sales budget, by month and in total. b. A schedule of expected cosh collections, by month and in total. C.A merchandise purchases budget in units and in dollers. 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. Decermine any borrowing that would be needed to maintain the min cosh balance of S68.000. 3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prepare a master budget for the three-month period ending June 30 that includes 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 $68,000. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

 
Case 8-33 (Algo) Master Budget with Supporting Schedules [LO8-2, LO8-4, LO8-8, LO8-9, LO8-10] 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-$17 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) February (actual) March (actual) April (budget) May (budget) 23, 600 June (budget) 29,600 July (budget) 43,600 68,600 103,600 53,600 33,600 31,600 28,600 August (budget) September (budget) 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 S5.80 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: Variable: Sales commissions 4% of sales F1 d: $ 380,000 36,000 $ 142,000 $ 16,000 $ 4,800 $ 32,000 Advertising Rent Salaries Utilities Insurance Depreciation Insurance is paid on an annual basis, in November of each year. The company plans to purchase $25,000 in new equipment during May and $58,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $28,500 each quarter, payable in the first month of the following quarter.
Transcribed Image Text:Case 8-33 (Algo) Master Budget with Supporting Schedules [LO8-2, LO8-4, LO8-8, LO8-9, LO8-10] 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-$17 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) February (actual) March (actual) April (budget) May (budget) 23, 600 June (budget) 29,600 July (budget) 43,600 68,600 103,600 53,600 33,600 31,600 28,600 August (budget) September (budget) 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 S5.80 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: Variable: Sales commissions 4% of sales F1 d: $ 380,000 36,000 $ 142,000 $ 16,000 $ 4,800 $ 32,000 Advertising Rent Salaries Utilities Insurance Depreciation Insurance is paid on an annual basis, in November of each year. The company plans to purchase $25,000 in new equipment during May and $58,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $28,500 each quarter, payable in the first month of the following quarter.
The company's balance sheet as of March 31 is given below: Assets Cash Accounts receivale (5, 320 February salesi S592,960 Narch sales) Inventory Prepatd inurance Property and equipent (ret) 159,152 Total assets S 2,a14,43 Liabilities and stockholders tquity Aecunte payable Dlvidends payable 110,e00 28,5 Comon steck Retained carnings Total llabiltles and stackholdera' cquity 247,332 S 2,014,43 The company maintains a minimum cash balance of $68.000. Al borowing 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 alows 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 acumulated interest on the loan and as much of the loan as possible (in increments of S1,000), whie sil retaining at least $68.000 in cash. Required: Prepere a moster budget for the three-month period ending June 30. Include the following detelled schedules: 1. a. A sales budget, by month and in total. b. A schedule of expected cash collections, by month and in total. c.A merchandise purchases budget in units and in dollers. Show the budget by month and in total. C. d.A schedule of expected cash disbursements for merchandise purchases, by month and in total. 2. A cash budger. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of S68.000. 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. Prepare a master budget for the three-month period ending June 20 that includes 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 $68.000. (Cash deficiency, repaymenta and interest ahould be indicated by a minus sign.) Earrings Unlimited Cash Budget For the Three Months Ending June 30 Apr May June Quarter Beginning cash balance Add collections from customers Total cash available Less cash disabursements Merchandise purchases Advertising Rent Salaries Commissions Usites Equipment purehases Dividends paid Total cash disbursements Excess (deficiency) of cash available over diabursements Finansing Borrowings Repaymenta Interest Total finanoing Ending cash balance
Transcribed Image Text:The company's balance sheet as of March 31 is given below: Assets Cash Accounts receivale (5, 320 February salesi S592,960 Narch sales) Inventory Prepatd inurance Property and equipent (ret) 159,152 Total assets S 2,a14,43 Liabilities and stockholders tquity Aecunte payable Dlvidends payable 110,e00 28,5 Comon steck Retained carnings Total llabiltles and stackholdera' cquity 247,332 S 2,014,43 The company maintains a minimum cash balance of $68.000. Al borowing 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 alows 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 acumulated interest on the loan and as much of the loan as possible (in increments of S1,000), whie sil retaining at least $68.000 in cash. Required: Prepere a moster budget for the three-month period ending June 30. Include the following detelled schedules: 1. a. A sales budget, by month and in total. b. A schedule of expected cash collections, by month and in total. c.A merchandise purchases budget in units and in dollers. Show the budget by month and in total. C. d.A schedule of expected cash disbursements for merchandise purchases, by month and in total. 2. A cash budger. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of S68.000. 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. Prepare a master budget for the three-month period ending June 20 that includes 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 $68.000. (Cash deficiency, repaymenta and interest ahould be indicated by a minus sign.) Earrings Unlimited Cash Budget For the Three Months Ending June 30 Apr May June Quarter Beginning cash balance Add collections from customers Total cash available Less cash disabursements Merchandise purchases Advertising Rent Salaries Commissions Usites Equipment purehases Dividends paid Total cash disbursements Excess (deficiency) of cash available over diabursements Finansing Borrowings Repaymenta Interest Total finanoing Ending cash balance
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Where does the opening balance of cash come from (how is it derived) in Step 3. Preparing a Cash Budget? (see included picture.

 

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### Cash Budget for Earnings Unlimited **For the Three Months Ended June 30** --- #### Opening Balance of Cash - **April:** $92,000 - **May:** $68,712 - **June:** $159,984 - **Quarter:** $92,000 #### Cash Inflows - **Receipt of Cash:** - **April:** $802,400 - **May:** $1,242,700 - **June:** $1,531,700 - **Quarter:** $3,576,800 - **Cash Available for Disbursement:** - **April:** $894,400 - **May:** $1,311,412 - **June:** $1,691,684 - **Quarter:** $3,668,800 #### Cash Outflows (Expenses) - **Merchandise Purchase:** - **April:** $357,540 - **May:** $481,980 - **June:** $374,680 - **Quarter:** $1,214,200 - **Advertising:** - **April:** $380,000 - **May:** $380,000 - **June:** $380,000 - **Quarter:** $1,140,000 - **Rent:** - **April:** $36,000 - **May:** $36,000 - **June:** $36,000 - **Quarter:** $108,000 - **Salaries:** - **April:** $142,000 - **May:** $142,000 - **June:** $142,000 - **Quarter:** $426,000 - **Sales Commission (4% of Sales):** - **April:** $46,468 - **May:** $70,484 - **June:** $36,448 - **Quarter:** $153,400 - **Utilities:** - **April:** $16,000 - **May:** $16,000 - **June:** $16,000 - **Quarter:** $48,000 - **Equipment Purchase:** - **April:** $28,500 - **May:** $25,000 - **June:** $58
Transcribed Image Text:### Cash Budget for Earnings Unlimited **For the Three Months Ended June 30** --- #### Opening Balance of Cash - **April:** $92,000 - **May:** $68,712 - **June:** $159,984 - **Quarter:** $92,000 #### Cash Inflows - **Receipt of Cash:** - **April:** $802,400 - **May:** $1,242,700 - **June:** $1,531,700 - **Quarter:** $3,576,800 - **Cash Available for Disbursement:** - **April:** $894,400 - **May:** $1,311,412 - **June:** $1,691,684 - **Quarter:** $3,668,800 #### Cash Outflows (Expenses) - **Merchandise Purchase:** - **April:** $357,540 - **May:** $481,980 - **June:** $374,680 - **Quarter:** $1,214,200 - **Advertising:** - **April:** $380,000 - **May:** $380,000 - **June:** $380,000 - **Quarter:** $1,140,000 - **Rent:** - **April:** $36,000 - **May:** $36,000 - **June:** $36,000 - **Quarter:** $108,000 - **Salaries:** - **April:** $142,000 - **May:** $142,000 - **June:** $142,000 - **Quarter:** $426,000 - **Sales Commission (4% of Sales):** - **April:** $46,468 - **May:** $70,484 - **June:** $36,448 - **Quarter:** $153,400 - **Utilities:** - **April:** $16,000 - **May:** $16,000 - **June:** $16,000 - **Quarter:** $48,000 - **Equipment Purchase:** - **April:** $28,500 - **May:** $25,000 - **June:** $58
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