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 Credit Accounts receivable Debit $ 51.000 208.800 50.000 381,000 Buildings and equipment (net) Accounts payable Common stock $38425 500 000 $ 680 200 3680 200 b Actual sales for December and budgeted sales for the next four months are as follows December actual) $251 000 5 307 000 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 credits d. The company's gross margin is 60% of sales in other words, cost of goods sold is 90% of sales) Monthly expenses are budgeted as follows salaries and was $26.000 per month advertising 566,000 per month shipping 5% of sales other expenses of sales Depreciation, including depreciate assets acquired during the quarter will be 543 60 for the quarter Each month's ending inventory should equal 25% of the following month's cost of goods sold m i no v burchases is paid for in the month of purchase the other half is paid in the following month 4 Marthereument will be purchased for cash at a cost of 575500 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 we result of December d The company's gross margin is 40% of sales in other words cost of goods sold is 60% of sales) Monthly expenses are budgeted as follows alles and wages. 526000 per month advertising 566,000 per month shipping, 5% of sales other expense of sales Depreciation including depreciation on assets acquired during the quarter will be $43 860 for the quarter Each month's ending inventory should equal 25of the following month's cost of goods sold 9 One-half of a months inventory purchases is paid for in the month of purchase the other half is paid in the following month h. During February, the company purchase a new copy machine for $2.100 cash During March other equipment will be purchased for cash at a cost of $75 500 1. During January, the company will decare and pay $45.000 in cash dividends | 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 luis accurate interest at the end of the quarter Required: Using the data above complete the following statements and schedules for the first quarter 1. Schedule of expected cash collections - Cash sales Credits Totalcochons Schedule of Expected Cash Collections January February March 792001110051 400 $ 2592 2000 47400 205 500 0 0 S2000 593 000 SOT 600 2a Merchandise purchases budget 2- Merchandise purchases budget Merchandise Purchases budget Febr u ch Outer ded 237.500 155.00 134200 ed n osot 250 012100 001 00 527150312000 120 S 300 37600 1760 15356200 2 h o recchiebumes for chandise purchases 37750 30505 2 0 134. 00 3. Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Hillyard Company Cash Budget January February 51,000 $ 30,320 288,000 593,000 339,000 623,320 $ March 168,880 307,000 475,880 Quarter 51,000 1.188,000 1,239,000 703.650 Beginning cash balance Add cash collections Total cash available Less cash disbursements: Purchases of inventory Selling and administrative expenses Purchases of equipment Cash dividends Total cash disbursements Excess (deficiency) of cash Financing 222,000 123,680 312,900 139,440 2,1001 379,680 77,600 168,750 116,560 75,500 of 360,810 115,070 45,000 390,680 (51,680) 454 440 168,880 45,000 1,205,930 33,070 Borrowings 82,000 of or Repayments (82.000) (820) Interest 82,000 (82,000) (820) (820) 32,250 Total financing Ending cash balance 82,000 30,320 S 168,880 $ 115,070 S 4. Prepare an absorption costing income statement for the quarter ending March 31. Hillyard Company Income Statement For the Quarter Ended March 31 Sales Cost of goods sold: Cost of goods sold 777,600 $ 1,296,000 777,600 777.600 518,400 Selling and administrative expenses: 518,400 518,400 21 5. Prepare a balance sheet as of March 31. Hillyard Company Balance Sheet March 31 Assets Current assets Total current assets Total assets Liabilities and Stockholders' Equity Current abilities Stockholders' equity To b bies and stockholders equity