Required: Prepare a master budget for the three-month period ending June 30.

Include the following detailed budgets:

1.a- A sales budget, by month and in total
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Sales Budget

April May June Quarter

Budgeted unit sales 65,000 100,000 50,000 215,000
Selling price per unit x $10 x $10 x $10 x $10
Total Sales $650,000 $1,000,000 $500,000 $2,150,000

1b. A schedule of expected cash collections from sales, by month and in total.
Schedule of expected cash collections:
April May June Quarter
February sales $26,000 $26,000
March Sales (70%,10%) 280,000 $40,000 320,000
April Sales (20%,70%,10%) 130,000 455,000 65,000 650,000
May Sales (20%, 70%) 200,000 700,000 900,000
June sales (20%) 100,000 100,000
Total cash collections $436,000 $695,000 $865,000 $1,996,000

1c. A merchandise purchases budget in units and in dollars.

Show the budget by month and in total.
Merchandise purhases budget:
April May June Quarter
Budgeted unit sales 65,000 100,000 50,000 215,000
Add desired ending inventory
(40% of the next month's unit sales) 40,000 20,000 12,000 12,000
Total needs 105,000 120,000 62,000 227,000
Less beginning inventory 26,000 40,000 20,000 26,000
Required purchases 79,000 80,000 42,000 201,000

Cost of purchases at
$4 per unit $316,000 $320,000 $168,000 $804,000

1d. A schedule of expected cash disbursements for merchandise purchases,

by month and in total.
Budgeted cash disbursements for merchandise purchases:

Accounts payable $100,000 $100,000

April purchases 158,000 $158,000 316,000
May purchases 160,000 $160,000 320,000
June purchases 84,000 84,000
Total cash payments $258,000 $318,000 $244,000 $820,000
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.

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Cash Budget
For the Three Months Ending June 30

April May June Quarter

Cash balance $74,000 $50,000 $50,000 $74,000
Add collections from customers 436,000 695,000 865,000 1,996,000
Total cash available $510,000 $745,000 $915,000 $2,070,000
Less disbursements
Merchandise purchases 258,000 318,000 244,000 820,000
Advertising 200,000 200,000 200,000 600,000
Rent 18,000 18,000 18,000 54,000
Salaries 106,000 106,000 106,000 318,000
Commission (4% of sales) 26,000 40,000 20,000 86,000
Utilities 7,000 7,000 7,000 21,000
Equipment purchases - 16,000 40,000 56,000
Dividends paid 15,000 - - 15,000
Total disbursements 630,000 705,000 635,000 1,970,000
Excess (deficiency) of
receipts over disbursments (120,000) 40,000 280,000 100,000
Financing
Borrowings 170,000 10,000 0 180,000
Repayments - - (180,000) (180,000)
Interest
($170,000 x 1% x 3 +
$10,000 x 1% x 2) - - (5,300) (5,300)
Total Financing 170,000 10,000 (185,300) (5,300)
Cash balance, ending $50,000 $50,000 $94,700 $94,700
3. A budgeted income statement for the three-month period ending June 30.
Use the contribution approach.
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Budgeted Income Statement
For the Three Months Ending June 30

Sales (Part 1a) $2,150,000

Variable expenses:
Cost of goods sold @ $4 per unit 860,000
Commission @4% of sales 86,000 946,000
Contribution margin 1,204,000
Fixed expenses
Advertising ($200,000 x 3) 600,000
Rent ($18,000 x 3) 54,000
Salaries (106,000 x 3) 318,000
Utilities ($7,000 x 3) 21,000
Insurance ($3,000 x 3) 9,000
Depreciation ($14,000 x 3) 42,000 1,044,000
Net operating income 160,000
Interest expense (part 2) (5,300)
Net Income $154,700
4. A budgeted balance sheet as of June 30.

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Budgeted Balance Sheet
As of June 30
Assets
Currents Assets
Cash $ 94,700
Accounts Receivable 500,000
Inventory (12,000 units @ $4 per unit) 48,000
Prepaid insurance ($21,000 - $9,000) 12,000
Total Current Assets 654,700
Non Current Asset
Property and equipment, net
($950,000 + $56,000 - $42,000) 964,000
Total non-current asset 964,000
Total Assets 1,618,700

Liabilities and Stockholder's Equity

Liabilities
Accounts payable, purchases (50% x $168,000) 84,000
Dividends payable 15,000
Total liabilities 99,000
Stockholder's equity
Capital stock 800,000
Retained Earnings 719,700
Total Stockholders equity 1,519,700
Total liabilities and stockholder's equity 1,618,700

Notes:
Accounts receivable at June 30:
10% x May sales of $1,000,000 $100,000
80% x June sales of $500,000 400,000
Total $500,000

Retained earnings at June 30:

Balance, March 31 $580,000
Add net income (part 3) 154,700
Total 734,700
Less Dividends declared 15,000
Balance, June 30 $719,700