Question

Completing a master budget

Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] 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 Common stock Retained earnings 53,000 210,400 59,700 363,000 $ 89,025 500,000 97,075 686,100 $ 686,100 $ b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March $ 263,000 $ 398,000 $ 595,000 $ 309,000 $206,000 April

Answer 1

Solution: Schedule of Expected Cash Collections Cash sales (20% of current month sales) Credit sales (80% of previous month sales) Total collections January February March Quarter | 79600 119000 61800 260400 210400 318400 476000 1004800 290000 437400 537800|1265200 2a. Purchase budget Budgeted Cost of Goods Sold(60% of Sales) Add: Desired Ending Inventory(25% of Next Month's COGS) Total Needs Less: Beginning Inventory Required Inventory Purchase January February March Quarter 238800 357000 185400 781200 89250 46350 30900 30900 328050 403350 216300 812100 59700 89250 463501 59700 268350 314100 169950 752400 2b.cash Disbursement for Purchase December Purchase January Purchase(50% of 268350) February Purchase(50% 314100) March Purchase(50% of 169950) Total cash Disbursement for Purchase January February March Quarter 89025 89025 134175 134175 268350 157050 157050 314100 84975 84975 223200 291225242025 756450 January February March Quarter 53000 30960 31235 53000 290000 437400 537800 1265200 343000 468360 569035 1318200 3.cash budget Beginning Cash Balance Add: Cash Collection Total Cash Available Less: Cash Disbursement Inventory Purchase selling and administrative Expense** Equipment Purchase Cash Dividend Total Cash Disbursement Excess/Deficiency Financing: Borrowing Repayments Interest(84000*1%*3) Total Financing Ending Cash Balance 223200 127840 0 45000 396040 | -53040 291225 242025 756450 143600 120720 392160 2300 765001 78800 0 45000 437125 439245 1272410 31235 129790| 45790 840000 0 84000 0 0 -840001 -84000 0 -2520 -2520 84000 0 -86520 -2520 30960 31235 43270 43270 0 Cash Disbursement for selling and administrative Expenses** Salaries and Wages Advertising Shipping (5% of Sales) Other Expenses (3% of Sales) Total Cash Disbursement January February March Quarter 28000 28000 280000 84000 | 68000 68000 68000204000 19900 29750 15450|65100 11940 17850 9270 39060 127840 143600 120720 392160

1302000 59700 752400 812100 30900 781200 520800 4.Income statement For the Quarter ended March 31 sales (398000+595000+309000) cost of goods sold beginning inventory Purchases goods available for sale ending inventory Gross margin selling and administrative expense: salaries and wages advertising shipping depreciation other expense net operating income Interest expense net income 5.Balance sheet March 31. Assets Current Assets Cash Account Receivable(80% of 309000) Inventory Total Current Assets Building and Equipment 363000+2300+76500-44180 Total Assets 43270 247200 30900 321370 397620 718990 84000 204000 65100 44180 39060 436340 84460 2520 81940 84975 Liabilities and Equity Current liabilities: Account Payable(50% of 169950) stockholder equity: common stock Retained Earnings** Total Liability and Equity 500000 134015 718990 **Retained earning Beginning balance add: Net Income Total Less: Cash Dividend Ending balance 97075 81940 179015 45000 134015