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:

As of December $31($the end of the prior quarter$),$ the company$$s general ledger showed the following account balances:

Debits Credits

Cash $ $46,000$

Accounts receivable $232,000$

Inventory $58,500$

Buildings and equipment $($net$)375,000$

Accounts payable $ $95,000$

Capital shares $512,000$

Retained earnings $104,500$

$ $711,500$ $ $711,500$

Actual sales for December and budgeted sales for the next four months are as follows:

December $($actual$)$ $ $290,000$

January $390,000$

February $570,000$

March $290,000$

April $200,000$

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.

The company$$s gross margin is $40\%$ of sales.

Monthly expenses are budgeted as follows: salaries and wages, $$27,000$ per month; advertising, $$71,000$ per month; shipping, $5\%$ of sales; depreciation, $$14,000$ per month; other expenses, $3\%$ of sales.

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$.$

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.

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.$

During January, the company will declare and pay $$44,000$ in cash dividends.

The company must maintain a minimum cash balance of $$32,000.$ An open line of credit is available at a local bank for any borrowing that may be needed during the quarter. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. Borrowings and repayments of principal must be in multiples of $$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.

$2-$a$.$ Inventory purchases budget.

$2-$b$.$ Schedule of cash disbursements for purchases.

$3.$ Schedule of cash disbursements for 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.$)$

$5.$ Prepare an income statement for the quarter ending March $31.$

$6.$ Prepare a balance sheet as of March $31.$