Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the first quarter:

a.	As of December 31 (the end of the prior quarter), the companys general ledger showed the following account balances:

	Debits			Credits
Cash	$	47,000
Accounts receivable		232,000
Inventory		63,000
Buildings and equipment (net)		366,000
Accounts payable				$	95,000
Capital shares					500,000
Retained earnings					113,000
	$	708,000		$	708,000

b.	Actual sales for December and budgeted sales for the next four months are as follows:

December (actual)	$	290,000
January		420,000
February		670,000
March		310,000
April		180,000

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 companys gross margin is 40% of sales.
e.	Monthly expenses are budgeted as follows: salaries and wages, $25,000 per month; advertising, $69,000 per month; shipping, 5% of sales; depreciation, $15,000 per month; other expenses, 3% of sales.
f.	At the end of each month, inventory is to be on hand equal to 25% of the following months sales needs, stated at cost.
g.	One-half of a months inventory purchases are paid for in the month of purchase; the other half are paid for in the following month.
h.	During February, the company will purchase a new copy machine for $3,000 cash. During March, other equipment will be purchased for cash at a cost of $83,000.
i.	During January, the company will declare and pay $43,000 in cash dividends.
j.	The company must maintain a minimum cash balance of $28,000. An open line of credit is available at a local bank for any borrowing that may be needed during the quarter. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. Borrowings and repayments of principal must be in multiples of $1,000. Interest is paid only at the time of payment of principal. The annual interest rate is 12%. (Figure interest on whole months, e.g., 1/12, 2/12.)

Required:

Using the preceding data, complete the following statements and schedules for the first quarter:

4.	Cash budget. (Roundup "Borrowing" and "Repayments" answers to the nearest whole dollar amount. Any "Repayments" and "Interest" should be indicated by a minus sign.)

5.	Prepare an income statement for the quarter ending March 31.

6.	Prepare a balance sheet as of March 31.

References

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