Question

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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 58,888 214,400 60,450 368,000 $ 90,525 500,000 110,325 $ 700, 850 $ 700,850 b. Actual sales for December and budgeted sales for the next four months are as follows: December(actual) January February March $268.000 $ 403,000 $600,000 $315,000 $211.000 April 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.)

Answer 1

Answer to Part 1. Schedule of Expected Cash Collections February March January Quarter Cash Sales 120000 80600 63000 263600 Collection from Credit Sales Total Cash Collections 322400 480000 1016800 214400 295000 442400 543000 1280400 Answer to Part 2. Merchandise Purchases Budget February March January Quarter Budgeted Cost of goods sold Add: Desired Ending Inventory Total Needs Less: Beginning Inventory Required Purcha ses 241800 360000 189000 790800 90000 47250 31650 31650 331800 407250 220650 822450 60450 90000 47250 60450 271350 317250 173400 762000 Schedule of Expected Cash Disbursements Merchandise Purchases February March Quarter January December Purchases January Purchases February Purchases March Purchases Total Disbursements 90525 90525 271350 135675 135675 158625 158625 317250 86700 86700 765825 226 200 294300 245325

Answer to Part 3 Cash Disbursements for Expenses February March January Quarter Salaries and Wages Advertising Shipping Other Expenses Total Cash Disbursements for Expenses 99000 33000 33000 33000 63000 63000 63000 189000 20150 30000 15750 65900 12090 18000 9450 39540 128240 144000 121200 393440 Cash Budget Ja nuary February March Quarter Beginning Cash Balance Add: Cash Collections Total Cash Available Less: Cash Disbursements For Inventory For Equipment For Cash Dividends For Expenses Total Cash Disbur sements Excess (Deficiency) of Cash Financing: Borrowings Repayments Interest 58000 30560 31860 58000 442400 295000 543000 1280400 353000 472960 574860 1338400 245325 765825 226 200 294300 79000 81800 0 2800 45000 0 0 45000 121200 128240 144000 393440 399440 441100 445525 1286065 31860 46440 129335 52335 77000 0 0 77000 0 0 -77000 -77000 -2310 0 0 -2310 Total Financing Ending Cash Balance 77000 0 -79310 -2310 50025 30560 31860 50025