It is the end of March and you have just been hired as a new management trainee by Irie Earrings Unlimited, a distributor of hand-crafted earrings to various resort gift shops and craft vendors 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. you have decided to prepare a cash budget for the upcoming second quarter of the year. The company sells different styles of earrings, but all are sold for the same price. Actual sales of earrings for the last three months and budgeted sales for the next six months are as follows: January (actual).....$200,000 May(budget).....................$500,000 February(actual)....$260,000 June (budget).................. $300,000 March (actual)......$400,000 July (budget).....................$280,000 April (budget).......$650,000 August (budget).................$250,000 All sales are on credit, with no discount, and payable within 15 days. However, the company has found that only 20% of a months 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. Data relating to purchases of merchandise is as follows: MARCH APRIL MAY JUNE Purchases $200,000 $236,000 $168,000 $116,800 One-half of a months purchase is paid for in the month of purchase; the other half is paid for in the following month. Monthly operating expenses for the company are given below: Variable: Sales commissions.......................4% of sales Fixed: Advertising............................... $200,000 Rent........................................ 18,000 Salaries.................................... 106,000 Utilities.................................... 7,000 Insurance expired........................ 3,000 Depreciation.............................. 14,000 Insurance is paid on an annual basis, in November of each year. Page 3 of 4 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, payables in the first month of the following quarter. A listing of some of the companys ledger accounts as of March 31 is given below: Assets & Liabilities $ Cash...................................................... 74,000 Accounts receivable ($26,000February sales $320,000 March sales)................................ 346,000 Accounts payable.................................... 100,000 Dividends payable................................... 15,000 Part of the budgeting program will be to establish an ongoing line of credit at a local bank. Therefore, determine the borrowing that will be needed to maintain a minimum cash balance of $50,000. If the company has an outstanding loan balance and finds itself with cash in excess of the minimum balance, it plans to pay off the portion thereof of .