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 Common 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 $262,000 $397,000 $594,000 $308,000 $ 205,000 April

Answer 1

Hillyard Co Schedule of expected cash collections Calculation Req 1 Feb Feb Jan Mar Quarter Jan Mar 594,000 Sales 397,000 308,000 1,299,000 Cash collections - 308,000*20% Cash sales 259,800 118,800 -397,000*20% -594,000*20% 79,400 61,600 Credit sales 209,600 475,200 1,002,400 -397,000*80% -594,000*80% 317,600 289,000 Total cash collections 436,400 536,800 1,262,200 Merchandise Purchase budget Req 2a Budgeted Cost of Goods Sold Add Desired Ending Inventory Feb Feb Jan Mar Quarter Jan Mar 779,400 -397,000*60% 594,000*60% 308.000*60% 238,200 356,400 184,800 -205,000 60%*25% 356,400*20% -184,800*20% 89,100 46,200 30,750 30,750 810,150 Total Needs 215,550 327,300 402,600 Less Beginning Inventory End Inv of Jan End Inv of Feb 59,550 89,100 46,200 59,550 169,350 Required Purchases 267,750 313,500 750,600 Schedule of expected cash disbursements-Purchases Req 2b Feb Quarter Feb Jan Mar Jan Mar Dec purchases - Accts Payable 88,725 88,725 267,750 313,500 - 267,750/2 Jan Purchases 267,750/2 133,875 133,875 -313,500/2 =169,350/2 Feb Purchases 156,750 156,750 313,500/2 Mar Purchases 84,675 84,675 Total payments for purchases 222,600 290,625 241,425 754,650 Cash budget Req 3 Cash balance, beginning Feb Feb Jan Mar Quarter Jan Mar 30,640 52,000 32,695 52,000 Add Cash collections 289,000 436,400 536,800 1,262,200 467,040569,495 1,314,200 Total cash available 341,000 Less cash disbursements 754,650 385,920 Inventory Purchases 241,425 222,600 290,625 Selling & admin expenses 125,760 141,520 27,000+67,000+(397,000* (5%+3%)) =27,000+67,000+(594,000*(5%+3%))| =27,000+67,000+( 308,000*(5%+3%)) 118.640 Equipment purchases 2,200 76,000 78,200 Dividends 45,000 45,000 Total Cash disbursements 434,345 393,360 436,065 1,263,770 Excess (deficiency) of cash (52,360) 32,695 133,430 50,430 Financing Borrowings 83,000 83,000 53,000+30,000 (83,000) (2,490) (85,490) (83,000) Round off deficiency of $52,360 to $53,000 for borrowings calculation (2,490) (2,490) Repayments Interest at 1% per month -83,000*1%*3 Total financing Cash balance, ending 83,000 30,640 47,940 32,695 47,940

Income Statement Req 4 Sales 1,299,000 Cost of goods sold Beginning Inventory 59,550 Purchases 750,600 Less Closing Inventory (30,750) Cost of goods sold Gross Margin Selling& Admin expenses 779,400 519,600 Advertising Salaries and wages -67,000*3 201,000 27,000*3 81,000 Shipping =1,299,000*5% 64,950 Depreciation 44,020 Other expenses 38,970 1,299,000*3% Total Selling & Admin expenses 429,940 Net Operating income 89,660 Interest expense 2,490 Net income 87,170 Balance Sheet Req 5 Assets Cash 47,940 308,000*80% Accounts Receivable 246,400 Inventory 30,750 Total current assets 325,090 Buildings & Equipment, net 396,180 -362,000+78,200-44,020 Total Assets 721,270 Liabilities & Equity Current Liabilties 169,350/2 Accounts Payable 84,675 Total Current Liabilties 84,675 Stockholders Equity Common Stock 500,000 Retained Earnings Total Stockholders Equity 136,595 -94,425+87,170-45,000 636,595 Total Liabilities & Equity 721,270