Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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:

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

Debits Credits
Cash $ 46,000
Accounts receivable 232,000
Inventory 58,500
Buildings and equipment (net) 375,000
Accounts payable $ 95,000
Capital shares 512,000
Retained earnings 104,500
$ 711,500 $ 711,500

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

December (actual) $ 290,000
January 390,000
February 570,000
March 290,000
April 200,000

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 credit sales.

The companys gross margin is 40% of sales.

Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month; advertising, $71,000 per month; shipping, 5% of sales; depreciation, $14,000 per month; other expenses, 3% of sales.

At the end of each month, inventory is to be on hand equal to 25% of the following months sales needs, stated at cost.

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.

During February, the company will purchase a new copy machine for $1,500 cash. During March, other equipment will be purchased for cash at a cost of $85,500.

During January, the company will declare and pay $44,000 in cash dividends.

The company must maintain a minimum cash balance of $32,000. 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: 1. Schedule of expected cash collections.

2-a. Inventory purchases budget.

2-b. Schedule of cash disbursements for purchases.

3. Schedule of cash disbursements for expenses.

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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Evidence Based Audit In General Practice

Authors: Richard Baker, Robin C. Fraser MD FRCGP, Mayur Lakhani MRCP MRCGP DCH

1st Edition

075063104X, 978-0750631044

More Books

Students also viewed these Accounting questions

Question

3. Identify the methods used within each of the three approaches.

Answered: 1 week ago