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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
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: Cash Accounts receivable Inventory Buildings and equipment (net): Accounts payable Common stock. Retained earnings $ 56,000 212,800 60,150 366,000 $ 89,925 500,000 105,025 $ 694,950 $ 694,950 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual). $ 266,000 January $ 401,000 February $ 598,000 March April $ 313,000 $ 209,000 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. (In other words, cost of goods sold is 60% of sales.) e. Monthly expenses are budgeted as follows: salaries and wages, $31,000 per month: advertising, $65,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $44,660 for the quarter. f. Each month's ending inventory should equal 25% of the following month's cost of goods sold. One-half of a month'e inuentan nurchacae le naid for in the month of nurchaco the other half le naid in the following month
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