Earrings Unlimited

1
a Sales budget
April May
Sales (units) 65,000 100,000
Sales (dollars) $ 650,000 $ 1,000,000

b Cash collections from sale

April May
February sales $ 26,000
March sales $ 280,000 $ 40,000
April sales $ 130,000 $ 455,000
May sales $ 200,000
June sales
Total collections $ 436,000 $ 695,000

c Merchandise purchase budget

April May
In units
Desired ending inventory 40,000 20,000
Add: Sales during the month 65,000 100,000
Less: Opening inventory (26,000) (40,000)
Purchases 79,000 80,000

Purchases (in dollars) @$4 per unit $ 316,000 $ 320,000

d Cash disbursement for purchases

April May
March purchases $ 100,000
April purchases $ 158,000 $ 158,000
May purchases $ 160,000
June purchases
Total disbursements $ 258,000 $ 318,000

2 Cash budget

April May
Beginning cash balance $ 74,000 $ 50,000
 Receipts from customers $ 436,000 $ 695,000
Total cash $ 510,000 $ 745,000

Cash disbursements:
To vendors for purchases $ 258,000 $ 318,000
Sales commissions $ 26,000 $ 40,000
Advertising $ 200,000 $ 200,000
Rent $ 18,000 $ 18,000
Salaries $ 106,000 $ 106,000
Utilities $ 7,000 $ 7,000
Purchase of new equipment $ - $ 16,000
Payment of dividends $ 15,000 $ -
Interest on borrowings $ - $ -
Total disbursements $ 630,000 $ 705,000

Excess(Deficiency) of Cash Available $ (120,000) $ 40,000

Financing:
Cash Borrowed $ 170,000 $ 10,000
Loan Repayments $ - $ -
Loan Balance $ 170,000 $ 180,000

Cash Balance at End of Month $ 50,000 $ 50,000

3 Budgeted Income Statement for the period ended 30 June

Sales
Less: Variable expenses
Cost of goods sold
Beginning inventory $ 104,000
Add: Purchases $ 804,000
Less: Ending inventory $ (48,000)
Sales commission
Contribution margin
Less: Operating expenses
Advertising $ 600,000
Rent $ 54,000
Salaries $ 318,000
Utilities $ 21,000
Insurance $ 9,000
Depreciation $ 42,000
Interest expense $ 5,300
Total operating expenses
 Net income

4 Budgeted Balance Sheet as at June 30

Assets
Cash
Accounts receivable (May sales $100,000 ; June sales
$500,000)
Inventory
Prepaid insurance
Property, plant and equipment (net)
Total assets
Liabilities and stockholder's equity
Accounts payable
Dividends payable
Capital stock
Retained earnings
Total liabilities and stockholder's equity
 June Total
50,000 215,000
$ 500,000 $ 2,150,000

June Total
$ 26,000
$ 320,000
$ 65,000 $ 650,000
$ 700,000 $ 900,000
$ 100,000 $ 100,000
$ 865,000 $ 1,996,000

June Total

12,000 72,000
50,000 215,000
(20,000) (86,000)
42,000 201,000

$ 168,000 $ 804,000

June Total
$ 100,000
$ 316,000
$ 160,000 $ 320,000
$ 84,000 $ 84,000
$ 244,000 $ 820,000

June Total
$ 50,000 $ 74,000
$ 865,000 $ 1,996,000
$ 915,000 $ 2,070,000

$ 244,000 $ 820,000
$ 20,000 $ 86,000
$ 200,000 $ 600,000
$ 18,000 $ 54,000
$ 106,000 $ 318,000
$ 7,000 $ 21,000
$ 40,000 $ 56,000
$ - $ 15,000
$ 5,300 $ 5,300
$ 640,300 $ 1,975,300

$ 274,700 $ 94,700

$ - $ 180,000
$ 180,000 $ 180,000
$ - $ -

$ 94,700 $ 94,700

$ 2,150,000

$ 860,000

$ 86,000
$ 1,204,000

$ 1,049,300
$ 154,700

$ 94,700

$ 500,000
$ 48,000
$ 12,000
$ 964,000
$ 1,618,700

$ 84,000
$ 15,000
$ 800,000
$ 719,700
$ 1,618,700