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 $ 57.000 Accounts receivable 213,600 Inventory 60,300 Buildings and equipment (net) 367,000 Accounts payable $ 90,225 Common stock 500,000 Retained earnings 107,675 $ 697,900 $ 697,900 b. Actual sales for December and budgeted sales for the next four months are as follows: December(actual) $ 267.000 January $ 402,000 February $ 599,000 March $ 314,000 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 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, $32,000 per month: advertising, $64,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $44,820 for the quarter. '1'!va n." u\". uullvl- : f. Each month's ending inventory should equal 25% of the following month's cost of goods sold. 9. One-half ofa month's 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 $2,700 cash. During March, other equipment will be purchased for cash at a cost of $78,500. 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. Required: Using the data above, complete the following statements and schedules for the rst quarter: 1. Schedule of expected cash collections: 2-a. Merchandise purchases budget: 2b. Schedule of expected cash disbursements for merchandise purchases: 3. Cash budget: 4. Prepare an absorption costing income statement for the quarter ending March 31. 5. Prepare a balance sheet as of March 31. \fMerchandise Purchases Budget January February March Quarter Budgeted cost of goods sold $241,200* $ 359,400 Add desired ending inventory 89,850+ Total needs 331,050 359,400 0 0 Less beginning inventory 60,300 Required purchases $ 270,750 $ 359,400 $ 0 0 *$402,000 sales x 60% cost ratio = $241,200. +$359,400 x 25% = $89,850.Schedule of Expected Cash Disbursements for Merchandise Purchases January February March Quarter December purchases $ 90,225 $ 90,225 January purchases 135,375 135,375 270,750 February purchases O March purchases 0 Total cash disbursements for purchases $ 225,600 $ 135,375 $ 0 $ 360,975Beginning cash balance 57,000 294.000 351.000 Add collections from customers Total cash available Less cash disbursements: 225,600 128,160 Inventory purchases Selling and administrative expenses Equipment purchases Cash dividends Total cash disbursements 45.000 398.760 Excess (deciency) of cash (47,760) Financing: Borrowings Repayments Interest Total nancing $ (47,760) Ending cash balance Hillyard Company Income Statement For the Quarter Ended March 31 Cost of goods sold: 0 C 0 Selling and administrative expenses: O O 0a'.' g l Current assets: Total current assets Total assets Liabilities and Stockholders' Equity Current liabilities: Stockholders' equity: Total liabilities and stockholders' equity