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—$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. 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.

The company’s balance sheet 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 schedules

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.

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—$19 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 $6.00 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:

Insurance is paid on an annual basis, in November of each year.

The company plans to purchase $26,000 in new equipment during May and $60,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $30,000 each quarter, payable in the first month of the following quarter.

Selected items from the company’s March 31 balance sheet are as follows:

The company maintains a minimum cash balance of $70,000. 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 $70,000 in cash.

Required:

Prepare a master budget for the three-month period ending June 30. Include the following detailed 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 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 $70,000.

ou 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—$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. 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.

The company’s balance sheet 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 schedules

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.

COURSE PROJECT 1 INSTRUCTIONS

You have just been contracted as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets 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 - $10 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow:

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 bracelets sold in the following month.

Suppliers are paid $4 for each bracelet. 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 discounts. 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 expenses:

Sales commissions                         4% of sales

Fixed expenses:

Advertising                                        $200,000

Rent                                                   $18,000

Salaries                                         $106,000

Utilities                                              $ 7,000

Insurance                                           $3,000

Depreciation                                     $14,000

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.

Other relevant data is given below:

Cash balance as of September 30                       $74,000

Inventory balance as of September 30             $112,000

Merchandise purchases for September            $200,000

The company maintains a minimum cash balance of at least $50,000 at the end of each month. 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 the exact amount needed 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 will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash.

Required:

Prepare a cash 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.

You have just been hired as a new management trainee by Ace Wholesale, Inc a distributor of

brooms 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 brooms, but all are sold for the same price—$10 per unit.

Actual sales of brooms for the last three months and budgeted sales for the next six months follow (in units of brooms):

January (actual) 20,000

February (actual) 24,000

March (actual) 40,000

April (budget) 100,000

May (budget) 160,000

June (budget) 90,000

July (budget) 80,000

August (budget) 36,000

September (budget) 32,000

The concentration of sales before and during May is due to Graduation Days. Sufficient inventory should be on hand at the end of each month to supply 45% of the bracelets sold in the following month. Suppliers are paid $4 for a broom. 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 22% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 8% is collected in the second month following sale. Monthly operating expenses for the company are given below:

Variable:

Sales commissions 5% of Sales

Fixed:

Advertising $200,000

Rent $18,000

Salaries $106,000

Utilities $7,000

Insurance $3,000

Depreciation $14,000

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 at March 31 is given below:

Assets

Cash $74,000

Accounts receivable (net) 331,200

Inventory 180,000

Prepaid insurance 21,000

Property and equipment (net) 950,000

Total assets $1,556,200

Liabilities and Stockholders’ Equity

Accounts payable $134,000

Dividends payable 15,000

Common stock 800,000

Retained earnings 607,200

Total liabilities and stockholders’ equity $1,556,200

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:

* A merchandise purchases budget in units and in dollars. Show the budget by month and in total?

* A schedule of expected cash disbursements for merchandise purchases, by month and in total?

* 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?

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—$15 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 $4.50 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:

Insurance is paid on an annual basis, in November of each year.

The company plans to purchase $18,500 in new equipment during May and $45,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $18,750 each quarter, payable in the first month of the following quarter.

The company’s balance sheet as of March 31 is given below:

The company maintains a minimum cash balance of $55,000. 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 $55,000 in cash.

Required:

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

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 $55,000.

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 summary journal entries to record the following transactions for a company in its first month of operations.

1. Raw materials purchased on account, $116,000.
2. Direct materials used in production, $46,000. Indirect materials used in production, $20,600.
3. Paid cash for factory payroll, $55,000. Of this total, $41,000 is for direct labor and $14,000 is for indirect labor.
4. Paid cash for other actual overhead costs, $9,250.
5. Applied overhead at the rate of 120% of direct labor cost.
6. Transferred cost of jobs completed to finished goods, $85,600.
7. Sold jobs on account for $123,000 g(2). The jobs had a cost of $85,600 g(1).

Historically the United States has always enjoyed being the world's largest producer of goods and services. However, it appears that all of that will change shortly. According to The Independent, in an article dated February 1, 2007, by the 2030s China's GDP will become larger than the United States' GDP based on their current growth rate and by the 2040s India's GDP will also become larger than the United States' GDP as well. This means that the United States will only be the third largest economy in the world (China will be first and India will be second). How do you feel about that? How might that impact the U.S. economy? What kinds of political impacts will it have?