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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 preparation
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: Credits Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Capital shares Retained earnings Debits $ 50,000 216,000 57,000 371, 000 $ 91, 000 500,000 103, 000 $694, 000 $694, 000 b. Actual sales for December and budgeted sales for the next four months are as follows: b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March April $ 270,000 380,000 570,000 240,000 220,000 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, $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. 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 $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. 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 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. HILLYARD COMPANY Schedule of Expected Cash Collections January February March Quarter Cash sales Credit sales
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