Question

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: a. As of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances: Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Comunon stock Retained earnings $ 52,000 209,600 59,550 362,000 $ 88, 725 500,000 94,425 $ 683,150 $ 683,150 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March April $ 262,000 $397,000 $594,000 $308,000 $ 205,000 C. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales. d. The company's gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.) e. Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month: advertising, $67,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $44,020 for the quarter. f. Each month's ending inventory should equal 25% of the following month's cost of goods sold.

Answer 1

1)	Schedule of Expected cash collections
			January	Feburary	March	Quarter
Cash sales			79400	118800	61600	259800
Credit sales			209,600	317600	475200	1,002,400
total collections			289000	436400	536800	1262200
Accounts receivable at march 31= 308,000*80%=246,400
2-a)		Merchandise purchase budget
			January	Feburary	March	Quarter
budgeted cost of goods sold			238200	356400	184800	779400
Add:Ending inventory			89100	46200	30750	30,750
total needs			327300	402600	215550	810150
less Beginning inventory			59,550	89,100	46,200	59,550
Required purchases			267,750	313,500	169,350	750,600
2-b)	Schedule of Expected cash disbursement for Merchandise purchase
			January	Feburary	March	Quarter
December purchases			88,725			88,725
january purchases			133875	133875		267750
Feburary purchases				156750	156750	313500
march purchases					84675	84675
total cash disbursement for purchases			222,600	290625	241425	754,650
Accounts payable=		84,675
3)			Cash budget
			January	Feburary	March	Quarter
Beginning cash balance			52,000	30,640	32695	52,000
Add cash collections			289000	436400	536800	1262200
total cash available			341,000	467040	569495	1,314,200
less cash disbursements
purchase of inventory			222,600	290625	241425	754,650
selling and adm expense			125760	141520	118640	385920
purchase of equipment			0	2,200	76,000	78200
cash dividends			45,000	0	0	45,000
total cash disbursement			393,360	434345	436065	1,263,770
Excess(Deficiency) of cash			-52,360	32695	133430	50,430
Financing
Borrowings			83,000	0	0	83,000
Repayments			0	0	-83,000	-83000
interest			0	0	-2,490	-2490
total financing			83,000	0	-85490	-2,490
ending cash balance			30,640	32695	47940	47,940
	interest expense = 83000*1%*3
			2490
4)			income statememt
Sales						1299000
cost of goods sold
Beginning invnetory				59,550
Add purchases				750,600
cost of goods avaialble				810,150
less ending inventory				30,750		779,400
Gross profit						519,600
Selling and administrative exp
Salaries and wages				81,000
Advertising				201,000
shiiping 5% of sales				64950
other expense 3% of sales				38970
Depreciation				44,020		429,940
operating income						89,660
less interest expense						2,490
Net income						87,170
5)		Balance sheet
Asses
current assets
cash						47940
Account receivable						246,400
inventory						30,750
total current assets						325,090
buildings and Equipment (net)						396,180
total assets						721,270
liabilities & stockholders Equity
current liabilities
Accounts payable						84,675
total current liabilities						84,675
Stockholders Equity
common stock						500,000
Retained earnings						136,595
total stockholders equity						636,595
total liabilities & stockholders equity						721,270