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 company's general ledger showed the following account balances: Debits Credits Cash Accounts receivable Inventory $50,000 216,000 58,500 Buildings and equipment (net) 365,000 Accounts payable Capital shares $ 94,000 490,000 Retained earnings 105,500 $689,500 $689,500 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March $270,000 390,000 580,000 April 250,000 190,000 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 company's gross margin is 40% of sales. e. Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month; advertising. $71,000 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 month's sales needs, stated at cost. g. One-half of a month's 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 $84,000. L During January, the company will declare and pay $46,000 in cash dividends. 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) Required: Using the preceding data, complete the following statements and schedules for the first quarter: 1. Schedule of expected cash collections. Cash sales Credit sales Total cash collections HILLYARD COMPANY Schedule of Expected Cash Collections January February 2-a. Inventory purchases budget. HILLYARD COMPANY Inventory Purchases Budget Total needs March Quarter January February March Quarter s 2-b. Schedule of cash disbursements for purchases. HILLYARD COMPANY Schedule of Cash Disbursements for Purchases January February December purchases January purchases February purchases March purchases Total cash disbursements for purchases March Quarter 3. Schedule of cash disbursements for expenses. HILLYARD COMPANY Schedule of Cash Disbursements for Operating Expenses Total cash disbursements for operating expenses January February March 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.) Total cash available Deduct: Disbursements: Total disbursements Excess (deficiency) of cash Financing Total financing HILLYARD COMPANY Cash Budget January February March Quarter 5. Prepare an income statement for the quarter ending March 31. 5. Prepare an income statement for the quarter ending March 31. HILLYARD COMPANY Income Statement For the Quarter Ended March 31 Deduct: Cost of goods sold: Goods available for sale Deduct: Operating expenses: 6. Prepare a balance sheet as of March 31. Current assets: Total current assets Total assets Current liabilities: Stockholders' equity: HILLYARD COMPANY Balance Sheet As of March 31 Assets Liabilities and Shareholders' Equity Total shareholders' equity Total liabilities and shareholders' equity