Accounting Lesson 8-01, 8-02, & 8-04

Hillyard Company, an ofce 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 rst quarter: a. As of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances: Cash $ 64,000 Accounts receivable 219,200 Inventory 61 ,350 Buildings and equipment (net) 374,000 Accounts payable $ 92,325 Common stock 500,000 Retained eamings 126,225 $ 718,550 $ 718,550 b. Actual sales for December and budgeted sala for the next four months are as follows: Decemberlactual) $ 274000 January $ 409,000 February $ 606,000 March 5 321,000 April as 217,000 0. 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, $39,000 per month: advertising, $57,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation new assets acquired during the quarter, will be $45,940 for the quarter. f. Each month's ending inventory should equal 25% of the following month's cost of goods sold. 9. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid in the following month. h. During February, the company will purchase a new copy machine for $3,400 cash. During March, other equipment will be purchased for cash at a cost of $82,000. i. During January, 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 beginning 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 accumulated interest a the end of the quarter. Required: Using the data above, complete the following statements and schedules for the rst quarter: 1. Schedule of expected cash collections: 2-a. Merchandise purchases budget: 2-b. Schedule of expected cash disbursements for merchandise purchasg: 3. Cash budget: 4. Prepare an absorption costing income statement for the quarter ending March 31. 5. Prepare a balance sheet as of March 31. Complete this question by entering your answers in the tabs below. 1 1\