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This Case Study is a comprehensive examination of a master budgeting problem completed with the preparation of Sales Budget, Cash Collections Budget, Purchases Budget, Cash Disbursement Budget, Cash Budget, pro-forma Income Statement and pro-forma Balance Sheet. For this case study, you will prepare a spreadsheet showing the computations used to create each schedule. In addition, a well formatted memo (1-2 pages) to management is required to support your experience with the case study.

Answer la Earrings Unlimited Sales Budget April May 65,000 100,000 $ 10$ 10 $ $ 650,000 $1,000,000 $ Budgeted unit sales Selling price per unit Total sales June Quarter 50,000 215,000 10 $ 10 500,000 $ 2,150,000 Answer 1b Earrings Unlimited Schedule of Expected cash collection April May February sales (26,000*$10*10%) $ 26,000 March sales(40,000*$10*70%) $ 280,000 March sales(40,000*$10*10%) $ 40,000 April sales $ 130,000 $ 455,000 $ May sales $ 200,000 $ June sales $ Total Cash Collection $ 436,000 $ 695,000 $ 20% collected in the month of sales 70% collected in following month after sales 10% collected in second month following after sales June Quarter $ 26,000 $ 280,000 $ 40,000 65,000 $ 650,000 700,000 $ 900,000 100,000 $ 100,000 865,000 $ 1,996,000 June 50,000 Quarter 215,000 Answer 1c Earrings Unlimited Merchandise Purchase Budget April May Budgeted unit sales 65,000 100,000 Add:Desired ending merchandise inventory(40% of following month's sold) 40,000 20,000 Total needs 105,000 120,000 Less:Beginning merchandise inventory 26,000 40,000 Required purchase (A) 79,000 80,000 Unit cost (B) $ 4.00 $ 4.00 $ Required dollar purchases (A*B) $ 316,000 $ 320,000 $ 12,000 62,000 20,000 42,000 4.00 $ 168,000 $ 72,000 287,000 86,000 201,000 4.00 804,000 July sales is 30,000 so June ending inventory is 30,000*40% which is 12,000 April sales is 65,000 so March ending inventory is 65,000*40% which is 26,000 which is April's beginning inventor Answer 1d Earrings Unlimited Budgeted Cash disbursements for merchandise purchases April May Accounts Payable March 31 $ 100,000 April purchase $ 158,000 $ 158,000 may purchase $ 160,000 $ June purchase $ Total cash payments $ 258,000 $ 318,000 $ 50% paid in month of purchase 50% paid in first month after purchase June Quarter $ 100,000 $ 316,000 160,000 $ 320,000 84,000 $ 84,000 244,000 $ 820,000 Answer 2 Earrings Unlimited Cash Budget April May $ 74,000 $ 50,000 $ $ 436,000 $ 695,000 $ $ 510,000 $ 745,000 $ June Quarter 40,000 $ 74,000 865,000 $ 1,996,000 905,000 $ 2,070,000 Beginning cash balance Add: Collection from customers Total Cash Available (A) Less: Cash Disbursments Merchandise purchase Advertising Rent Salaries Commission(4% of sales) Utilities Equipment purchase Dividend paid Total Cash Disbursments (B) Excess(deficiency) of cash available over disbursements (C = A-B) Financing Borrowings Repayment Interest($170,000*1%*3months) Total Financing (D) Ending cash balance (C-D) $ 258,000 $ 318,000 $ 200,000 $ 200,000 $ $ 18,000 $ 18,000 $ $ 106,000 $ 106,000 $ $ 26,000 $ 40,000 $ $ 7,000 $ 7,000 $ $ 16,000 $ $ 15,000 $ 630,000 $ 705,000 $ 244,000 $ 820,000 200,000 $ 600,000 18,000 $ 54,000 106,000 $ 318,000 20,000 $ 86,000 7,000 $ 21,000 40,000 $ 56,000 $ 15,000 635,000 $ 1,970,000 $ 120,000 $ 40,000 $ 270,000 $ 100,000 $ 170,000 $ $ $ 40,000 $ $ -170,000 $ -5,100 $ -175,100 $ 94,900 $ 170,000 -170,000 -5,100 -5,100 94,900 $ 170,000 $ $ 50,000 $ $ 2,150,000 $ 946,000 $ 1,204,000 Answer 3 Earrings Unlimited Income Statement For three months ended June 30 Sales Variable expense: Cost of Goods Sold (215,000 * $4) $ 860,000 Sales Commission $ 86,000 Total Variable expense: Contribution Margin Fixed Expenses: Advertising expense $ 600,000 Rent expense $ 54,000 Salaries expense $ 318,000 Utilities expense $ 21,000 Insurance expense ($3,000*3) $ 9,000 Depreciation expense ($14,000*3) $ 42,000 Total Fixed Expenses Income from Operations Interest Expense Net Income $1,044,000 $ 160,000 $ -5,100 $ 154,900 Answer 4 Earrings Unlimited Balance Sheet Jun-30 Assets Cash $ 94,900 $ 500,000 $ 48,000 $ 12,000 Accounts Receivable Inventory (12,000*$4) Prepaid insurance ($21,000 - $9,000) Property Plant and Equipment($950,000 + $56,000 - $42,000) Total assets $ 964,000 $ 1,618,900 Liabilities and Shareholders' Equity Accounts Payable Dividend Payable Common Stock Retained earnings ($580,000+ $154,900 - $15,000) Total Liabilities and Shareholders' Equity $ 84,000 $ 15,000 $ 800,000 $ 719,900 $ 1,618,900 If you have any doubts, feel free to ask in the comment box. Please do upvote if the solution helped you. Answer la Earrings Unlimited Sales Budget April May 65,000 100,000 $ 10$ 10 $ $ 650,000 $1,000,000 $ Budgeted unit sales Selling price per unit Total sales June Quarter 50,000 215,000 10 $ 10 500,000 $ 2,150,000 Answer 1b Earrings Unlimited Schedule of Expected cash collection April May February sales (26,000*$10*10%) $ 26,000 March sales(40,000*$10*70%) $ 280,000 March sales(40,000*$10*10%) $ 40,000 April sales $ 130,000 $ 455,000 $ May sales $ 200,000 $ June sales $ Total Cash Collection $ 436,000 $ 695,000 $ 20% collected in the month of sales 70% collected in following month after sales 10% collected in second month following after sales June Quarter $ 26,000 $ 280,000 $ 40,000 65,000 $ 650,000 700,000 $ 900,000 100,000 $ 100,000 865,000 $ 1,996,000 June 50,000 Quarter 215,000 Answer 1c Earrings Unlimited Merchandise Purchase Budget April May Budgeted unit sales 65,000 100,000 Add:Desired ending merchandise inventory(40% of following month's sold) 40,000 20,000 Total needs 105,000 120,000 Less:Beginning merchandise inventory 26,000 40,000 Required purchase (A) 79,000 80,000 Unit cost (B) $ 4.00 $ 4.00 $ Required dollar purchases (A*B) $ 316,000 $ 320,000 $ 12,000 62,000 20,000 42,000 4.00 $ 168,000 $ 72,000 287,000 86,000 201,000 4.00 804,000 July sales is 30,000 so June ending inventory is 30,000*40% which is 12,000 April sales is 65,000 so March ending inventory is 65,000*40% which is 26,000 which is April's beginning inventor Answer 1d Earrings Unlimited Budgeted Cash disbursements for merchandise purchases April May Accounts Payable March 31 $ 100,000 April purchase $ 158,000 $ 158,000 may purchase $ 160,000 $ June purchase $ Total cash payments $ 258,000 $ 318,000 $ 50% paid in month of purchase 50% paid in first month after purchase June Quarter $ 100,000 $ 316,000 160,000 $ 320,000 84,000 $ 84,000 244,000 $ 820,000 Answer 2 Earrings Unlimited Cash Budget April May $ 74,000 $ 50,000 $ $ 436,000 $ 695,000 $ $ 510,000 $ 745,000 $ June Quarter 40,000 $ 74,000 865,000 $ 1,996,000 905,000 $ 2,070,000 Beginning cash balance Add: Collection from customers Total Cash Available (A) Less: Cash Disbursments Merchandise purchase Advertising Rent Salaries Commission(4% of sales) Utilities Equipment purchase Dividend paid Total Cash Disbursments (B) Excess(deficiency) of cash available over disbursements (C = A-B) Financing Borrowings Repayment Interest($170,000*1%*3months) Total Financing (D) Ending cash balance (C-D) $ 258,000 $ 318,000 $ 200,000 $ 200,000 $ $ 18,000 $ 18,000 $ $ 106,000 $ 106,000 $ $ 26,000 $ 40,000 $ $ 7,000 $ 7,000 $ $ 16,000 $ $ 15,000 $ 630,000 $ 705,000 $ 244,000 $ 820,000 200,000 $ 600,000 18,000 $ 54,000 106,000 $ 318,000 20,000 $ 86,000 7,000 $ 21,000 40,000 $ 56,000 $ 15,000 635,000 $ 1,970,000 $ 120,000 $ 40,000 $ 270,000 $ 100,000 $ 170,000 $ $ $ 40,000 $ $ -170,000 $ -5,100 $ -175,100 $ 94,900 $ 170,000 -170,000 -5,100 -5,100 94,900 $ 170,000 $ $ 50,000 $ $ 2,150,000 $ 946,000 $ 1,204,000 Answer 3 Earrings Unlimited Income Statement For three months ended June 30 Sales Variable expense: Cost of Goods Sold (215,000 * $4) $ 860,000 Sales Commission $ 86,000 Total Variable expense: Contribution Margin Fixed Expenses: Advertising expense $ 600,000 Rent expense $ 54,000 Salaries expense $ 318,000 Utilities expense $ 21,000 Insurance expense ($3,000*3) $ 9,000 Depreciation expense ($14,000*3) $ 42,000 Total Fixed Expenses Income from Operations Interest Expense Net Income $1,044,000 $ 160,000 $ -5,100 $ 154,900 Answer 4 Earrings Unlimited Balance Sheet Jun-30 Assets Cash $ 94,900 $ 500,000 $ 48,000 $ 12,000 Accounts Receivable Inventory (12,000*$4) Prepaid insurance ($21,000 - $9,000) Property Plant and Equipment($950,000 + $56,000 - $42,000) Total assets $ 964,000 $ 1,618,900 Liabilities and Shareholders' Equity Accounts Payable Dividend Payable Common Stock Retained earnings ($580,000+ $154,900 - $15,000) Total Liabilities and Shareholders' Equity $ 84,000 $ 15,000 $ 800,000 $ 719,900 $ 1,618,900 If you have any doubts, feel free to ask in the comment box. Please do upvote if the solution helped you