Chapter 8 19126MMonthly operating expenses for the company are given below:bnt Jsybud1.AssetsCashVariable:..a.b.C.Sales commissionsFixed:AdvertisingRentSalariesUtilitiesInsuranceDepreciationMInsurance 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 newequipment 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.The company's balance sheet as of March 31 is given below:Accounts receivable ($26,000 February sales;$320,000 March sales)InventoryPrepaid insuranceProperty and equipment (net)Total assetsLiabilities and Stockholders' EquityAccounts payableDividends payable4% of salesCommon stockRetained earningsTotal liabilities and stockholders' equity$200,000$18,000$106,000$7,000$3,000$14,000$ 74,000346,000104,00021,000950,000 T$1,495,000$ 100,000The company maintains a minimum cash balance of $50,000. All borrowing is done at thebeginning of a month; any repayments are made at the end of a month.15,000 8- 3249800,000580,000$1,495,000The company has an agreement with a bank that allows the company to borrow in incrementsof $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and forsimplicity we will assume that interest is not compounded. At the end of the quarter, the companywould 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 detailedschedules:A sales budget, by month and in total.A schedule of expected cash collections, by month and in total.A merchandise purchases budget in units and in dollars. Show the budget by month andin total.A schedule of expected cash disbursements for merchandise purchases, by month and ind.total.2. A cash budget. Show the budget by month and in total. Determine any borrowing that wouldbe needed to maintain the minimum cash balance of $50,000.03.ninom gaisotiol pillA budgeted income statement for the three-month period ending June 30. Use the contributionapproach.201 mi DOTOSHOaldintison nood sya zidsb bate4. A budgeted balance sheet as of June 30. budgetary control system and explain how the problems are likely to reduce the effectivenessof the system.2. Explain how Ferguson & Son Manufacturing Company's budgetary control system could berevised to improve its effectiveness.(CMA, adapted)CASE 8-33 Master Budget with Supporting Schedules LO8-2, LO8-4, LO8-8, LO8-9, LO8-10You have just been hired as a new management trainee by Earrings Unlimited, a distributor ofearrings to various retail outlets located in shopping malls across the country. In the past, the com-pany has done very little in the way of budgeting and at certain times of the year has experienceda shortage of cash. Since you are well trained in budgeting, you have decided to prepare a masterbudget for the upcoming second quarter. To this end, you have worked with accounting and otherareas to gather the information assembled below.misin ynsamos sillThe 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):6161 12012January (actual)February (actual)March (actual)April (budget)May (budget)June (budget)July (budget)0020,00026,00040,000 August (budget)Fiore bor65,000100,000September (budget)50,00030,00028,00025,000The concentration of sales before and during May is due to Mother's Day. Sufficient inventoryshould be on hand at the end of each month to supply 40% of the earrings sold in the followingmonth.Suppliers are paid $4 for a pair of earrings. One-half of a month's purchases is paid for inthe 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 collectedin the following month, and the remaining 10% is collected in the second month following sale.Bad debts have been negligible.08 omul

Budgeting is the process of estimating future operations based on past performance. % are estimated…

Monthly operating expenses for the company are given below: Variable: Assets Cash 4. Sales commissions Fixed: Advertising Rent Salaries Utilities Insurance Depreciation Accounts receivable ($26,000 February sales; $320,000 March sales) 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. The company's balance sheet as of March 31 is given below: Inventory Prepaid insurance Property and equipment (net). Total assets 4% of sales Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholders' equity $200,000 $18,000 $106,000 $7,000 $3,000 $14,000 $ 74,000 346,000 104,000 21,000 950,000 $1,495,000 $ 100,000 15,000 800,000 580,000 $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 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 schedules: 1. a. b. C. 1007 A sales budget, by month and in total. A schedule of expected cash collections, by month and in total. 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. A budgeted balance sheet as of June 30.