1.Supplier invoices are received in the accounts department via email and printed. The details are entered into the accounts payable system by the accounts payable clerk, who then stamps the invoice as processed. The computer system automatically calculates the payment due date based on the supplier's credit terms that have been entered into the system.

2.As there are only a few suppliers each week, the accounts payable clerk validates the outstanding invoices via a phone call with the production manager. The production manager has an excellent memory for what he has ordered, and the deliveries received.

3.The computer system automatically generates a weekly list of invoices due for payment. The accounts payable clerk flags the invoices for cheques to be processed as direct deposits are not used. The system does allow the user to exclude an invoice from the payment run. The accounts payable ledger and general ledger are automatically updated once the payment runs are complete

4.The cheques are forwarded to the financial controller for signature. Supporting documentation is only attached to the cheques for non-major suppliers. The financial controller calls the production manager to verify the review process (step 2) has taken place, and other payments are verified to the attached invoice. If the financial controller is not available the accounts payable clerk usually has the cheques signed by the marketing manager. The payables clerk avoids asking the CEO to sign cheques as he asks too many questions. Any supporting documentation to the cheque is signed to avoid duplicate payment.

5.Monthly statements are received from the suppliers. However, the accounts payable clerk does not believe statement reconciliations are necessary.

a-Identifies and explains ten (10) control weaknesses associated with the purchases, accounts payable and payments system outlined above

b-Identifies and explains the account balance assertions for raw material inventory and accounts payable that are most impacted by control weaknesses

c-Recommends and justifies a control improvement for each of the weaknesses identified in requirement one

Jorgansen Lighting, Inc., manufactures heavy-duty street lighting systems for municipalities. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided the following data:
Year 1 year 2 year 3

Inventories:
Beginning (units) 210 160 180
Ending (units) 160 180 230
Variable costing net
operating income $290,000, $279,000 $250,000


The company's fixed manufacturing overhead per unit was constant at $560 for all three years.


Requirement 1:
Determine each year’s absorption costing net operating income. Present your answer in the form of a reconciliation report for year 1, 2 and 3.

Year 1 Year 2 Year 3
Beginning inventories

Ending inventories

Change in inventories

Fixed manufacturing overhead in beginning inventories

Fixed manufacturing overhead in ending inventories

Fixed manufacturing overhead deferred in (released from) inventorie

Variable costing net operating income

Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing



Absorption costing net operating income

Requirement 2:
In Year 4, the company's variable costing net operating income was $260,000 and its absorption costing net operating income was $290,000.

(a) Did inventories increase or decrease during Year 4?


(b) How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?

Deferred or released ???
Ffixed manufacturing overhead cost $

Antuan Company set the following standard costs for one unit of its product. Direct materials (4.0 Ibs. @ $5.00 per Ib.) $ 20.00 Direct labor (1.7 hrs. @ $10.00 per hr.) 17.00 Overhead (1.7 hrs. @ $18.50 per hr.) 31.45 Total standard cost $ 68.45 The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% capacity level. Overhead Budget (75% Capacity) Variable overhead costs Indirect materials $ 15,000 Indirect labor 75,000 Power 15,000 Repairs and maintenance 30,000 Total variable overhead costs $ 135,000 Fixed overhead costs Depreciation—Building 23,000 Depreciation—Machinery 70,000 Taxes and insurance 17,000 Supervision 226,750 Total fixed overhead costs 336,750 Total overhead costs $ 471,750 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (61,500 Ibs. @ $5.10 per lb.) $ 313,650 Direct labor (20,000 hrs. @ $10.30 per hr.) 206,000 Overhead costs Indirect materials $ 41,550 Indirect labor 176,000 Power 17,250 Repairs and maintenance 34,500 Depreciation—Building 23,000 Depreciation—Machinery 94,500 Taxes and insurance 15,300 Supervision 226,750 628,850 Total costs $ 1,148,500 rev: 03_28_2018_QC_CS-122864 4. Compute the direct labor cost variance, including its rate and efficiency variances. AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate

Kubin Company’s relevant range of production is 23,000 to 27,500 units. When it produces and sells 25,250 units, its average costs per unit are as follows:

  

	Average Cost per Unit
Direct materials	$	8.30
Direct labor	$	5.30
Variable manufacturing overhead	$	2.80
Fixed manufacturing overhead	$	6.30
Fixed selling expense	$	4.80
Fixed administrative expense	$	3.80
Sales commissions	$	2.30
Variable administrative expense	$	1.80

Required:

1. For financial accounting purposes, what is the total amount of product costs incurred to make 25,250 units?

2. For financial accounting purposes, what is the total amount of period costs incurred to sell 25,250 units?

3. For financial accounting purposes, what is the total amount of product costs incurred to make 27,500 units?

4. For financial accounting purposes, what is the total amount of period costs incurred to sell 23,000 units?

During 2018, HomeVideo, Inc. recorded all cash receipts and cash disbursements. However, HomeVideo, Inc.’s banker is requiring an income statement and balance sheet prepared on an accrual basis.

The following is a recap of the cash receipts for 2018:

Collections from customers	$      356,800
Proceeds from bank loan	75,000
Proceeds from sale of common stock	100,000
	$      531,800

The cash disbursements data is available on the attached Excel sheet. In addition, HomeVideo, Inc.’s payroll disbursements for wages totaled $105,200. The data was obtained from a separate (not provided) payroll journal.

Daniels’, a family friend, has asked for your assistance in preparing HomeVideo, Inc.’s financial statements at December 31, 2018 on an accrual basis. The following additional information is available:

1. Customers owed the company $16,500 at year-end for credit sales. Also, HomeVideo, Inc.’s cash collections included $7,000 of amounts collected in advance from other customers for services to be performed in 2019.
2. The firm signed a 3-year lease for a retail store with rent payments starting in January 2018. The rent is due on the 15^thof every month. Additionally, a security deposit of $5,000 was paid along with the first rent payment. This deposit is likely to be returned at the end of the lease term.
3. The equipment purchased during 2018 is depreciated on a straight-line basis assuming no salvage value. The firm uses a convention where one-half year of depreciation is taken in the year of acquisition (regardless of the actual purchase date).
4. The insurance payment was for a 1-year policy starting on February 1, 2018.
5. At year-end, $21,000 is owed to suppliers for merchandise purchased on credit and received.
6. At year-end, merchandise inventory costing $53,700 and supplies totaling $6,400 remained on hand.
7. Salaries earned, but not yet paid to employees at year-end totaled $7,300.
8. The bank loan requires interest at 10% per year and was issued on June 1, 2018. The principal and interest are to be repaid together on May 31, 2019.

Home Video, Inc. (Cash disbursements 1/1/2018 through 3/31/2019):

Insurance (2/1/18)

28,000

Merchandise (2018)

202,809

Merchandise (2019)

68,355

Office Equipment (2018)

55,000

Office Equipment (2019)

21,138

Other Expenses (2018)

12,893

Other Expenses (2019)

4,059

Rent (2018)

27,000

Rent (2019)

8,000

Supplies (2018)

32,452

Supplies (2019)

5,721

Required:

• Prepare an analysis that shows how cash-based income is converted to accrual-based net income for 2018.
• Prepare an accrual-based income statement for 2018 and a balance sheet as of December 31, 2018 using good form.
• Prepare a brief memo explaining the cash-to-accrual conversion and the results of your calculations.

On February 1, 2018, Cromley Motor Products issued 6% bonds, dated February 1, with a face amount of $95 million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $95,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Determine the price of the bonds issued on February 1, 2018.
2-a. Prepare amortization schedules that indicate Cromley’s effective interest expense for each interest period during the term to maturity.
2-b. Prepare amortization schedules that indicate Barnwell’s effective interest revenue for each interest period during the term to maturity.
3. Prepare the journal entries to record the issuance of the bonds by Cromley and Barnwell’s investment on February 1, 2018.
4. Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2020.

(Req-3 JE's: FEB 1, 2018: Record the issuance of the bonds by Cromley. FEB 1 2018: Record the Bond investment by Barnwell.)

(Req-4(Cromley): 1 Record the payment of interest for Cromley Company. 2 Record the accrued interest for Cromley Company. 3 Record the payment of interest for Cromley Company. 4 Record the payment of interest for Cromley Company. 5 Record the accrued interest for Cromley Company. 6 Record the payment of interest for Cromley Company.)

(Req-4(Barnwell): 1 Record the receipt of interest for Barnwell Company. 2 Record the accrued interest for Barnwell Company. 3 Record the receipt of interest for Barnwell Company. 4 Record the receipt of interest for Barnwell Company. 5 Record the accrued interest for Barnwell Company. 6 Record the receipt of interest for Barnwell Company.)

Budgeted Income Statement and Supporting Budgets

The budget director of Jupiter Helmets Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for May:

a. Estimated sales for May:

Bicycle helmet	9,500 units at $24 per unit
Motorcycle helmet	6,500 units at $195 per unit

b. Estimated inventories at May 1:

Direct materials:					Finished products:
Plastic		1,480	lbs.		Bicycle helmet		200 units at $15 per unit
Foam lining		520	lbs.		Motorcycle helmet		100 units at $90 per unit

c. Desired inventories at May 31:

Direct materials:					Finished products:
Plastic		2,000	lbs.		Bicycle helmet		400 units at $15 per unit
Foam lining		800	lbs.		Motorcycle helmet		300 units at $100 per unit

d. Direct materials used in production:

In manufacture of bicycle helmet:
Plastic		0.90 lb. per unit of product
Foam lining		0.20 lb. per unit of product
In manufacture of motorcycle helmet:
Plastic		3.50 lbs. per unit of product
Foam lining		1.40 lbs. per unit of product

e. Anticipated cost of purchases and beginning and ending inventory of direct materials:

Plastic		$4.40 per lb.
Foam lining		$0.90 per lb.

f. Direct labor requirements:

Bicycle helmet:
Molding Department		0.30 hr. at $15 per hr.
Assembly Department		0.10 hr. at $14 per hr.
Motorcycle helmet:
Molding Department		0.50 hr. at $15 per hr.
Assembly Department		0.40 hr. at $14 per hr.

g. Estimated factory overhead costs for May:

Indirect factory wages		$125,000			Power and light		$23,000
Depreciation of plant and equipment		45,000			Insurance and property tax		11,000

h. Estimated operating expenses for May:

Sales salaries expense		$175,000
Advertising expense		120,000
Office salaries expense		92,000
Depreciation expense—office equipment		6,000
Miscellaneous expense—selling		5,000
Utilities expense—administrative		3,000
Travel expense—selling		50,000
Office supplies expense		2,500
Miscellaneous administrative expense		1,500

i. Estimated other income and expense for May:

Interest revenue		$14,560
Interest expense		3,000

j. Estimated tax rate: 25%

4. Prepare a direct labor cost budget for May.

Jupiter Helmets Inc.
Direct Labor Cost Budget
For the Month Ending May 31
	Molding Department	Assembly Department	Total
Hours required for production:
Bicycle helmet	__________	____________
Motorcycle helmet	__________	____________
Total	__________	____________
Hourly rate	$_________	$___________
Total direct labor cost	$_________	$___________	$____________

6. Prepare a cost of goods sold budget for May. Work in process at the beginning of May is estimated to be $4,200, and work in process at the end of May is desired to be $3,800.

Jupiter Helmets Inc.
Cost of Goods Sold Budget
For the Month Ending May 31
Finished goods inventory, May 1			$_________
Work in process inventory, May 1		$__________
Direct materials:
Direct materials inventory, May 1	$___________
Direct materials purchases	____________
Cost of direct materials available for use	$___________
Less: Direct materials inventory, May 31	____________
Cost of direct materials placed in production	$___________
Direct labor	____________
Factory overhead	____________
Total manufacturing costs		___________
Total work in process during period		$__________
Less: Work in process inventory, May 31		___________
Cost of goods manufactured			_________
Cost of finished goods available for sale			$________
Less: Finished goods inventory, May 31			_________
Cost of goods sold			$________

8. Prepare a budgeted income statement for May. If required, round your interim calculations to nearest whole value.

Jupiter Helmets Inc.
Budgeted Income Statement
For the Month Ending May 31
Revenue from sales		$__________
Cost of goods sold		___________
Gross profit		$__________
Operating expenses:
Selling expenses	$_________
Administrative expenses	__________
Total operating expenses		____________
Income from operations		$___________
Other income:
Interest revenue	$_________
Other expenses:
Interest expense	__________	____________
Income before income tax		$___________
Income tax expense		____________
Net income		$___________

Kubin Company’s relevant range of production is 20,000 to 23,000 units. When it produces and sells 21,500 units, its average costs per unit are as follows:

  

	Average Cost per Unit
Direct materials	$	8.00
Direct labor	$	5.00
Variable manufacturing overhead	$	2.50
Fixed manufacturing overhead	$	6.00
Fixed selling expense	$	4.50
Fixed administrative expense	$	3.50
Sales commissions	$	2.00
Variable administrative expense	$	1.50

Required:

1. Assume the cost object is units of production:

a. What is the total direct manufacturing cost incurred to make 21,500 units?

b. What is the total indirect manufacturing cost incurred to make 21,500 units?

2. Assume the cost object is the Manufacturing Department and that its total output is 21,500 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department?

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $75,250 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation.

a. When the company sells 21,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives?

b. When the company sells 21,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

MONTGOMERY INC. Comparative Balance Sheets December 31, 2014 and 2013
		2014				2013
Assets
Cash	$	30,400			$	30,550
Accounts receivable, net		10,050				12,150
Inventory		90,100				70,150
Equipment		49,900				41,500
Accum. depreciation—Equipment		(22,500	)			(15,300	)
Total assets	$	157,950			$	139,050
Liabilities and Equity
Accounts payable	$	23,900			$	25,400
Salaries payable		500				600
Common stock, no par value		110,000				100,000
Retained earnings		23,550				13,050
Total liabilities and equity	$	157,950			$	139,050

MONTGOMERY INC. Income Statement For Year Ended December 31, 2014
Sales			$	45,575
Cost of goods sold				(18,950	)
Gross profit				26,625
Operating expenses
Depreciation expense	$	7,200
Other expenses		5,550
Total operating expense				12,750
Income before taxes				13,875
Income tax expense				3,375
Net income			$	10,500

Additional Information

a.	No dividends are declared or paid in 2014.
b.	Issued additional stock for $10,000 cash in 2014.
c.	Purchased equipment for cash in 2014; no equipment was sold in 2014.

(1)	Use the above financial statements and additional information to prepare a statement of cash flows for the year ended December 31, 2014, using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)

This week we cover bond financing. Often times when large amount of funds are needed for a project or expansion, companies and governments seek financing to help pursue these projects. Define what a bond is and discuss the advantages and disadvantages of bond financing, such as those covered in your chapter. Consider discussing why a company might choose to issue a bond instead of stock, a form of equity financing.

Shamrock, Inc. issues a $550,000, 10%, 10-year mortgage note on December 31, 2017, to obtain financing for a new building. The terms provide for annual installment payments of $89,510.

Prepare the entry to record the mortgage loan on December 31, 2017, and the first installment payment on December 31, 2018.

Dr. Shikongo and Dr. Sauer were in a partnership and traded together for some time. On 01 July

2016 Dr. Sauer decided to withdraw from the partnership to start her own practice. Their

abridged statement of financial position as at 30 June 2016 was:

ASSETS N$ EQUITY & LIABILITIES N$

Property, Plant & Equipment (PPE) 152,500.00 Capital: Dr. Shikongo 76,200.00

Accumulated depreciation:PPE (20,000.00) Capital: Dr. Sauer 65,200.00

Vehicles 65,000.00 Current account: Dr. Shikongo 21,750.00

Accumulated depreciation:Vehicle (25,000.00) Current account: Dr. Sauer 27,250.00

Trade receivable 27,600.00 Loan: Deutche Bank 31,000.00

Allowance for bad debts (3,500.00) Trade payable 17,500.00

Cash 42,300.00

238,900.00 238,900.00

Transactions for July 2016:

1. Trade receivable who owed N$ 20, 050.00 settled their accounts in full.

2. The trades payable were settled in full.

3. A vehicle was sold for N$ 19, 500.00 with a carrying value of N$ 25, 000.00.

4. A vehicle was sold for N$ 15, 000.00 with a carrying value of N$ 6, 000.00.

5. The loan from Deutche Bank was repaid in full.

6. The equipment was disposed of for N$ 50, 000.00

7. Land and building was sold by public auction for N$ 70, 000.00

You are required to:

1. Do the journal entries to record Dr. Sauers’ withdrawal from the partnership. ( 12

Marks)

2. Prepare the following accounts to show the liquidation and dissolution of Dr. Shikongo

& Dr. Sauer Partnership:

a. Realisation account. ( 6 Marks)

b. Capital accounts of the partners (in a columnar form) in the general ledger. ( 8

Marks)

3. Mention and discuss three factors that may lead to the dissolution of a partnership. ( 6

Marks)

ASSETS N$ EQUITY & LIABILITIES N$

Property, Plant & Equipment (PPE) 152,500.00 Capital: Dr. Shikongo 76,200.00

Accumulated depreciation:PPE (20,000.00) Capital: Dr. Sauer 65,200.00

Vehicles 65,000.00 Current account: Dr. Shikongo 21,750.00

Accumulated depreciation:Vehicle (25,000.00) Current account: Dr. Sauer 27,250.00

Trade receivable 27,600.00 Loan: Deutche Bank 31,000.00

Allowance for bad debts (3,500.00) Trade payable 17,500.00

Cash 42,300.00

238,900.00 238,900.00

You are the president of Campus Sweaters, Inc. Campus Sweaters manufacturers wool pullover v-neck sweaters of various sizes and colors. You are preparing the budgets for the first quarter of 2016 (January, February, and March). You have the following historical and projected sales in units:

Actual or Projected	Month	Units
Actual	November	9,000
Actual	December	8,000
Projected	January	11,000
Projected	February	10,000
Projected	March	6,000
Projected	April	7,000
Projected	May	7,000
Projected	June	7,000

It takes ten skeins of yarn to make one sweater. Each skein costs $1.30. Past experience shows you need to have enough sweaters on-hand to fill the next month and one-half of sales (approximately forty-five days). Also, you need enough yarn to manufacture the next month’s production.

You will have 12,000 sweaters in finished inventory and 80,000 skeins of yarn in raw materials inventory as of December 31, 2015. You purchased $90,000 of yarn in December that must be paid for in January. The Company incurred $7,500 of overhead cost during December 2015, and $13,500 of selling expenses in the last half of December. These also must be paid in January. The company policy is to pay prior month's charges on account on the tenth day of the following month unless otherwise designated.

Income Statements

Actual or Projected Sales	Actual	Actual	Projected	Projected	Projected
Month	November	December	January	February	March
Sales	$240,000	$270,000	$300,000	$270,000	$210,000
Cost of sales	144,000	162,000	180,000	162,000	126,000
Gross margin	96,000	108,000	120,000	108,000	84,000
Operating Expenses:
Selling	24,000	27,000	30,000	27,000	21,000
Administration	35,000	45,000	50,000	45,000	30,000
Rent	10,000	10,000	10,000	10,000	10,000
Sales salaries	20,000	20,000	20,000	20,000	20,000
Totals	89,000	102,000	110,000	102,000	81,000
Operating Income	7,000	6,000	10,000	6,000	3,000
Interest Expense	0	0	?	?	?
Net Income	$7,000	$6,000

A worker, using a knitting machine, can make five sweaters in an hour. The cost of direct labor per hour, including fringe, is $20.00. You incurred $13,000 of direct labor cost between December 16 and December 31, 2015 which will be paid on January 7, 2016. The manufacturing overhead rate is $5.00 per direct labor hour. All sweaters are sold wholesale to retail outlets at $30.00 each.

Salaries and wages are paid as follows: The pay period from the first to the fifteenth of the month is paid on the twenty-second day of each month; the pay period from the sixteenth to the thirty-first is paid on the seventh day of the following month.

Rent is paid in advance on the first day of each month. Fifty percent of the selling expenses are paid in the month incurred, and fifty percent in the following month. All manufacturing overhead and administrative costs are paid on the tenth day of the following month.

The cash in the bank on December 31, 2015 was forecast at $30,000. There were no outstanding borrowings. The company has a $500,000 line of credit at 12% per annum at the Old Rusty Bucket State Bank of Oreana. All borrowings, and any subsequent repayments must be made on the fifteenth day of the month. All loan takedowns must be repaid by December 31, 2016. Repayments can be made when extra cash is available, but are due on the fifteenth day of any month. The company has the policy to have at least $25,000 in the bank account at the end of each month even if they have to borrow it. However, more may be required depending on cash needs during the first week of the following month.

20% of the sales are collected in the month of sale. Seventy percent are collected in the next month, and five percent are collected in the third month.

>Use the information above to complete the following activities:

Step 01: Prepare a production budget for Campus Sweaters, Inc. for each of the following months: January, February, March 2016.

Step 02: Prepare a raw materials budget for each month.

Step 03: Prepare a raw materials budget in dollars for each month.

Step 04: Prepare a cost of goods manufactured schedule for each month.

Step 05: Prepare a cash budget for each month.

Partial answers provided:

The following relates to the month of January

Required production in units: 12,000

Required purchases of raw material in units 105,000

Required purchases of raw material in dollars: $136,500

Total Cost of Goods Manufactured: $216,000

Cash inflows $261,000

Cash outflows $238,000

Describe the three main attributes of a close corporation

b. Give 5 advantages and 5 disadvantages of a close corporation

c. Describe the three statutory requirements with regard to the accounting records and

financial reporting of a close corporation

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)	20,000	June (budget)	50,200
February (actual)	26,200	July (budget)	30,200
March (actual)	40,200	August (budget)	28,200
April (budget)	65,200	September (budget)	25,200
May (budget)	100,200

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 $4.10 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.. 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	$	210,000
Rent	$	19,000
Salaries	$	108,000
Utilities	$	7,500
Insurance	$	3,100
Depreciation	$	15,000

Insurance is paid on an annual basis, in November of each year.    The company plans to purchase $16,500 in new equipment during May and $41,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,750 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
Cash	$	75,000
Accounts receivable ($28,820 February sales;    $353,760 March sales)		382,580
Inventory		106,928
Prepaid insurance		21,500
Property and equipment (net)		960,000
Total assets	$	1,546,008
Liabilities and Stockholders’ Equity
Accounts payable	$	101,000
Dividends payable		15,750
Common stock		820,000
Retained earnings		609,258
Total liabilities and stockholders’ equity	$	1,546,008

The company maintains a minimum cash balance of $51,000. 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 $51,000 in cash.

1.	Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: 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 dollars. Show the budget by month and in total. (Round unit cost of purchases to 1 decimal place.)

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. Determining any borrowing that would be needed to maintain the minimum cash balance of $51,000

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.