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 $ 49,000 Accounts receivable 224,000 Inventory 60,000 Buildings and equipment (net) 376,000 Accounts payable $ 93,000 Capital shares 510,000 Retained earnings 106,000 $ 709,000 $ 709,000 b Actual sales for December and budgeted sales for the next four months are as follows December (actual) $ 280,000 January 400,000 February 630,000 March 280,000 April 210,000 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, $68,000 per month shipping, 5 of sales depreciation, $12,000 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 $2,400 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 $44,000 in cash dividends j The company must maintain a minimum cash balance of $31,000 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 )

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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:

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

	Debits		Credits
Cash	$	49,000
Accounts receivable		224,000
Inventory		60,000
Buildings and equipment (net)		376,000
Accounts payable			$	93,000
Capital shares				510,000
Retained earnings				106,000

	$	709,000	$	709,000

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


December (actual)	$	280,000
January		400,000
February		630,000
March		280,000
April		210,000

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, $68,000 per month; shipping, 5% of sales; depreciation, $12,000 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 $2,400 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 $44,000 in cash dividends.
j.	The company must maintain a minimum cash balance of $31,000. 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.)