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 ofthe 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 $ 50,000 Accounts receivable 216,000 Inventory 57,000 Buildings and equipment (net) 371,000 Accounts payable $ 91,000 Capital shares 500,000 Retained earnings 103,000 $694,000 $694.000 b. Actual sales for December and budgeted sales for the next four months are as follows: 5. Prepare an income statement for the quarter ending March 31. $ 1 ,190,000 Deduct: Cost of goods sold: Beginning inventory $ 56,2250 Add: Purchases 690,450 Goods available for sale 746,700 746,700 Deduct: Operating expenses: 6. Prepare a balance sheet as of March 31. HILLYARD COMPANY Balance Sheet As of March 31 Assets Current assets: Cash Accounts receivable Inventory Buildings and equipment, net Total current assets Ob. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) $270, 000 January 380, 000 February 570, 000 March 240, 000 April 220, 000c. 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, $26,000 per month; advertising, $70,000 per month; shipping, 5% of sales; depreciation, $14,000 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. 9. 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 $1,500 cash. During March, other equipment will be purchased for cash at a cost of$85,500. i. During January, the company will declare and pay $46,000 in cash dividends. j. The company must maintain a minimum cash balance of $30,000. 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 ofa 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 $ 0 $ 0 $ 0 $ 0 2-a. Inventory purchases budget. HILLYARD COMPANY Inventory Purchases Budget January February March Quarter Required inventory purchases Add: Desired ending inventory Total needs2-b. Schedule of cash disbursements for purchases. HILLYARD COMPANY Schedule of Cash Disbursements for Purchases January February March Quarter December purchases $ 270,000 January purchases 76,000 304,000 380,000 February purchases 114,000 456,000 570,000 March purchases 48,000 48,000 Total cash disbursements for purchases $ 76,000 $ 418,000 $ 504,000 $ 1,268,0003. Schedule of cash disbursements for expenses. SaIan'es and wages ____ $_$_$_$_ Total cash disbursements for operating expenses 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.) Operating expenses Add: Collections from sales Total cash available 0 0 O O Deduct: Disbursements: Total disbursements 0 0 0 0 Excess (deficiency) of cash Financing: Borrowings Repayments Interest Total financing 0 0 0 0 Cash balance, ending