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 companys general ledger showed the following account balances:

Cash	$	47,000
Accounts receivable		205,600
Inventory		58,800
Buildings and equipment (net)		357,000
Accounts payable			$	87,225
Common stock				500,000
Retained earnings				81,175
	$	668,400	$	668,400

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

December(actual)	$257,000
January	$392,000
February	$589,000
March	$303,000
April	$200,000

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, $22,000 per month: advertising, $62,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $43,220 for the quarter.
f.	Each months ending inventory should equal 25% of the following months cost of goods sold.
g.	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 will purchase a new copy machine for $1,700 cash. During March, other equipment will be purchased for cash at a cost of $73,500.
i.	During January, the company will declare and pay $45,000 in cash dividends.
j.	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 plus accumulated interest at the end of the quarter.

1. Schedule of expected cash collections: Quarter Schedule of Expected Cash Collections January February March Cash sales $ 78,400 Credit sales 205,600 Total collections $ 284,000 Check Figure: Total Cash Collections for the Quarter $ 1,247,200 2-a. Merchandise purchases budget: Connect Link: MANAGERIAL ACCOUNTING 50354 Quarter Merchandise Purchases Budget January February March Budgeted cost of goods sold 235,200* $ 353,400 Add desired ending inventory 88,3507 Total needs 323,550 Less beginning inventory 58,800 Required purchases $ 264,750 Check Figure: Total Merchandise Purchases for the Quarter $ 741,600 *$392,000 sales 60% cost ratio = $235,200. $353,400 ~ 25% = $88,350. 2-b. Schedule of expected cash disbursements for merchandise purchases: Schedule of Expected Cash Disbursements for Merchandise Purchases January February March Quarter December purchases $ 87,225 January purchases 132,375 132,375 February purchases March purchases Total cash disbursements for purchases Check Figure: Total Quarterly Cash Disbursements for Merchandise $ 745,650 3. Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.) March Quarter Hillyard Company Cash Budget January February $ 47,000 284,000 331,000 Beginning cash balance Add cash collections Total cash available Less cash disbursements: Purchases of inventory 219,600 115,360 45,000 379,960 (48,960) Selling and administrative expenses Purchases of equipment Cash dividends Total cash disbursements Excess (deficiency) of cash Financing: Borrowings Repayments Interest Total financing Ending cash balance Check Figure for January $ 30,040 Check Figure for the Quarter $ 71,260