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—$18 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 $5.4 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 $23,000 in new equipment during May and $54,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $25,500 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 $64,000. 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 $64,000 in cash.

Required:

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

A sales budget, by month and in total.

A schedule of expected cash collections from sales, by month and in total.

Earrings Unlimited

Schedule of Expected Cash Collections

Earrings Unlimited

Schedule of Expected Cash Collections

Earrings Unlimited

Schedule of Expected Cash Collections

Earrings UnlimitedSchedule of Expected Cash Collections

April May June Quarter

February sales $51,840 0 0 $51,840

March sales 539,280 77,040 0 616,320

April sales 244,080 854,280 122,040 1,220,400

May sales 0 308,400 1,079,400 1,387,800

June sales 0 0 158,400 158,400

Total cash collections $835,200 $1,239,720 $1,359,840 $3,434,760

** FIGURES IN BOLD ARE INCORRECT, PLEASE HELP, ALSO Letter C.

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.)

In the Illustrative Case in this chapter, payroll transactions for Brookins Company were analyzed, journalized, and posted for the third quarter of the fiscal year. In this problem, you are to record the payroll transactions for the last quarter of the firm's fiscal year. The last quarter begins on April 1, 20--.

The following are the account balances forwarded as of April 1:
(1) Union Due Payable: $100
(2) Employees SIT Payable: $546.92
(3) FICA Taxes Payable - OASDI: $1,068.88
(4) FICA Taxes Payable - HI: $249.98
(5) Employees FIT Payable: $1,124.00
(6) FUTA Taxes Payable: $149.16
(7) SUTA Taxes Payable: $571.78
(8) Cash: $57,673.56
(9) Wages and Salaries: $71,360.00
(10) Payroll taxes: $6,846.74

Note: The SUTA tax rate is 2.3%.

Analyze and journalize the transactions described in the narrative above. If an amount box does not require an entry, leave it blank or enter "0". If required, round your answers to the nearest cent.

                                                                      State and Local Government Expenditures

The city of San Alameda provides free health care services for the medically indigent (poor and uninsured). Suppose the city has $2 million to spend on these services and private goods. One unit of health care services (e.g. a physician office visit) costs $110. Thus, the budget equation for San Alameda for these two types of goods is:

$2 Million = $P + $110H,

where H is the units of indigent health care services provided, and P is total expenditure on private goods (P is measured in dollars because we assume each unit of P costs $1).

1. If the San Alameda spends equal amounts on indigent health care services and the private good, how many units of health care services are purchased by the city?

2. Suppose the city of San Alameda receives a 40-percent matching grant from the state for spending on indigent health services. Specifically, the state spends $0.40 on indigent health care services for every $1 spent by the city on these services.

2a) If, after receiving the grant, San Alameda spends $1 million on the private good, how many units of indigent health care services are purchased? (Round to nearest whole number)

2b) Under matching grant, how much of total indigent health care expenditures is paid by the state?

2c) What is the effective price of health care services for the city of San Alameda under the matching grant? (Enter a formula to calculate the effective price.. show work)

3. Suppose, instead of a matching grant, the state provided the city of San Alameda a block grant equal to what the state would have spent with the matching grant (2b. above). Suppose, also, San Alameda uses its budget plus the block grant to spend equal amounts on indigent health care services and the private good.

3a) How many units of indigent health care services are purchased by San Alameda?

4. Using relevant economic concepts, explain why a matching grant generally leads to more consumption of a public good than an unrestricted block grant.

enter formulas in all cells that contain question marks.

For example, in cell B30 enter the formula "=B19".

Notes:

In the text, variances are always displayed as positive numbers. To accomplish this, you can use the ABS() function in Excel. For example, the formula in cell C31 would be "=ABS(E31−B31)".

Cells D31 through D39 and G31 through G39 already contain formulas to compute and display whether variances are Favorable or Unfavorable. Do not enter data or formulas into those cells—if you do, you will overwrite these formulas.

Check your worksheet by changing the revenue in cell D4 to $16.00; the cost of ingredients in cell D5 to $6.50; and the wages and salaries in cell B6 to $10,000. The activity variance for net operating income should now be $850 U and the spending variance for total expenses should be $410 U. If you do not get these answers, find the errors in your worksheet and correct them.

PLEASE SHOW FORMULAS ^^^^

Revise the data in your worksheet to reflect the results for the subsequent period as shown below:

Planning Budget 1,700 meals served

Actual Activity 1,800 meals served

a. What is the activity variance for revenue?

b. What is the spending variance for the cost of ingredients?

c. What is spending variance for wages and salaries?

d. What is spending variance for total expenses?

For all the questions below select the appropriate answer:

1. Since government spending and planned investment are both fixed variables, what must be true of the aggregate expenditure function?
O A. The aggregate expenditure function is horizontal.
O B. The aggregate expenditure function is below and parallel to the consumption function.
O C. The aggregate expenditure function is above and parallel to the consumption function.
O D. The aggregate expenditure function is flatter than the consumption function and intersects it at the equilibrium output level.

2. Expansionary fiscal policy is used by the government to
A. create new jobs in the economy.
B. reduce the national debt.
C. reduce the budget deficit.
D. control inflation.

3. When government spending increases by $1, planned expenditures increase by $1
O A. and the equilibrium level of income will increase by $1.
O B. times the spending multiplier and the equilibrium level of income will increase by $1.
O C. and the equilibrium level of income will increase by $1 times the spending multiplier.
O D. and the equilibrium level of income will increase by less than $1.

4. When taxes are cut by $1, planned expenditures
O A. increase by $1 and the equilibrium level of income will increase by $1 times the tax multiplier.
O B. increase by less than $1 and the equilibrium level of income will increase by $1 times the tax
multiplier.
O C. increase by $1 and the equilibrium level of income will increase by $1 times the spending
multiplier.
O D. decrease by $1 and the equilibrium level of income will decrease by $1 times the tax multiplier.

4. Consider the following information on aggregate income, consumption expenditure, and planned investment for a country:

Aggregate Output/Income Consumption Planned Investment

  
$10,700 $10,280 $500   
10,900 10,460 500
11,100 10,640 500   
11,300 10,820 500   
11,500 11,000 500
11,700 11,180   500   
11,900 11,360 500

  
12,100 11,540   500   
When aggregate income is $11,100,
O A. saving is $40 and unplanned investment (inventory change) is - $40.
O B. saving is $460 and unplanned investment (inventory change) is - $40.
O C. saving is - $460 and unplanned investment (inventory change) is $500.
O D. saving is - $40 and unplanned investment (inventory change) is $500.
The equilibrium level of output/income is $ . (Enter your response as an integer.)
Based on the information above, calculate the MPC and MPS.
MPC = . (Round your response to two decimal places.)
MPS = . (Round your response to two decimal places.)
The investment multiplier is . (Enter your response as an integer.)
Suppose there is no change in the level of the MPC and the MPS and planned investment jumps by $200. Calculate
the change in the equilibrium value of income/output.
The change in equilibrium income/output is $ . (Enter your response as an integer.)

PLEASE ANALYZE (IN WORDS) THE OUTCOME OF THIS PROBLEM.

Chaz Corporation prepares quarterly financial statements and invests its excess funds in marketable securities. At the end of 2018, Chaz's portfolio of trading investments consisted of the following equity securities:

During the first half of 2019, Chaz engaged in the following investment transactions:

Show the items of income or loss from investment transactions that Chaz reports for each of the first and second quarters of 2019.

Show how the preceding items are reported on the first and second quarter 2019 ending balance sheets, assuming that management expects to dispose of the Benford and Gold securities within the next year.

The controller for Clint Swifty Co. is attempting to determine the amount of cash to be reported on its December 31, 2020, balance sheet. The following information is provided.

1. Commercial savings account of $690,500 and a commercial checking account balance of $812,900 are held at First National Bank of Yojimbo.

2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Swifty to write checks on this balance, $5,228,200. 3. Travel advances of $194,800 for executive travel for the first quarter of next year (employee to reimburse through salary reduction).

4. A separate cash fund in the amount of $1,493,000 is restricted for the retirement of long-term debt.

5. Petty cash fund of $1,750.

6. An I.O.U. from Marianne Koch, a company customer, in the amount of $166,700.

7. A bank overdraft of $116,700 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank.

8. The company has two certificates of deposit, each totaling $537,300. These CDs have a maturity of 120 days.

9. Swifty has received a check that is dated January 12, 2021, in the amount of $131,320.

10. Swifty has agreed to maintain a cash balance of $514,800 at all times at First National Bank of Yojimbo to ensure future credit availability.

11. Swifty has purchased $2,005,100 of commercial paper of Sergio Leone Co. which is due in 60 days.

12. Currency and coin on hand amounted to $7,949. (a) Compute the amount of cash and cash equivalents to be reported on Swifty Co.’s balance sheet at December 31, 2020.

The amount of Cash and Cash Equivalents reported on December 31, 2020 $