1. Eain tokit (4) tait thes dyte t 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 zasis. The following data have been assembled to assist in preparing the mastar 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: b. Actual sales for December and budgeted sales for the next four months are as follows: 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 menth: advertising. $70,000 per month; shipping. 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,000 for the quarter. 1. Fach month's ending inventory should equal 25% of the following month's cost of goods sold. g. One-half of a month's inventory parchases is paid for ia the month of purchase: the other half is paid in the following month. h. During February, the cornpany will purchase a new copy machine for $1.700 cash. During March. other equipment will be purchased for cash at a cost of $84.500. L. During Jantary, the company will declare and pay $45.000 in cash dividends. j. Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the heginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus aecamulated interest it the end of the quarter Using the data above, complete the following statements and schedules for the first quarter: 1. Schedule of expected cash collections: 2 a. Merchandise purchaser budget: b. Schedule of expected cash disbursements for merchundise purchases: 3. Cash budget: 4. Using Schedule 9 as your guide, prepare an absorption costing income statement for the quarter ending March 31 . 5. Prejare a balance sheet as of March 31 . 1. Eain tokit (4) tait thes dyte t 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 zasis. The following data have been assembled to assist in preparing the mastar 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: b. Actual sales for December and budgeted sales for the next four months are as follows: 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 menth: advertising. $70,000 per month; shipping. 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,000 for the quarter. 1. Fach month's ending inventory should equal 25% of the following month's cost of goods sold. g. One-half of a month's inventory parchases is paid for ia the month of purchase: the other half is paid in the following month. h. During February, the cornpany will purchase a new copy machine for $1.700 cash. During March. other equipment will be purchased for cash at a cost of $84.500. L. During Jantary, the company will declare and pay $45.000 in cash dividends. j. Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the heginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus aecamulated interest it the end of the quarter Using the data above, complete the following statements and schedules for the first quarter: 1. Schedule of expected cash collections: 2 a. Merchandise purchaser budget: b. Schedule of expected cash disbursements for merchundise purchases: 3. Cash budget: 4. Using Schedule 9 as your guide, prepare an absorption costing income statement for the quarter ending March 31 . 5. Prejare a balance sheet as of March 31
