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: 49,000 Cash $ 207,200 Accounts receivable 59,100 359,000 Inventory Buildings and equipment (net) Accounts payable $ 87,825 500,000 Common stock 86,475 Retained earnings $ 674,300$ 674,300 b. Actual sales for December and budgeted sales for the next four months are as follows: December(actual) $259,000 January $394,000 February $591,000 March $305,000 April $202,000 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, $24,000 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 $43,540 for the quarter. f. Each month's ending inventory should equal 25% of the following month's cost of goods sold. g. One-half of a 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 $1,900 cash. During March, other equipment will be purchased for cash at a cost of $74,500. 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 and for cimnlicitu w not comnaunded month Hvill accumo that internet ic The During March, other equipment will be purchased for cash at a cost of $74,500. 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 first quarter: 1. Schedule of expected cash collections: Schedule of Expected Cash Collections January February March Quarter Cash sales $ 78,800 Credit sales 207,200 Total collections $ 286,000 Check Figure: Total Cash Collections for the Quarter $ 1,253,200 2-a. Merchandise purchases budget: Merchandise Purchases Budget January February March Quarter Budgeted cost of goods sold 236,400* $ 354,600 Add desired ending inventory 88,650+ Total needs 325,050 Less beginning inventory 59,100 Required purchases $ 265,950 Check Figure: Total Merchandise Purchases for the Quarter $ 745,200 *$394,000 sales * 60% cost ratio = $236,400. 1$354,600 25% = $88,650. 2-b. Schedule of expected cash disbursements for merchandise purchases: Schedule of Expected Cash Disbursements for Merchandise Purchases January February March Quarter December purchases $ 87,825 January purchases 132,975 132,975 February purchases March purchases Total cash disbursements for purchases Check Figure: Total Quarterly Cash Disbursements for Merchandise $ 749,250 3. Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Hillyard Company Cash Budget January February $ 49,000 March Quarter Beginning cash balance Add cash collections 286,000 Total cash available 335,000 Less cash disbursements: 220,800 119,520 Purchases of inventory Selling and administrative expenses Purchases of equipment Cash dividends 45,000 Total cash disbursements 385,320 (50,320) Excess (deficiency) of cash Financing: Borrowings Repayments Interest Total financing Ending cash balance