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 $ 46,000 204,800 Accounts receivable 58,650 356,000 Inventory Buildings and equipment (net) Accounts payable $ 86,925 500,000 Common stock 78,525 Retained earnings $ 665,450 665,450 Actual sales for December and budgeted sales for the next four months are as follows: December(actual) $256,000 January $391,000 February $588,000 March $302.000 April $199,000 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, $21,000 per month: advertising, $61,000 per month; shipping, 5% of sales, other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $43,060 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 $1,600 cash. During March, other equipment will be purchased for cash at a cost of $73,000. 1. 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 Cash sales $ 78,200 Credit sales 204,800 Total collections $ 283,000 $ 0 $ 0 Check Figure: Total Cash Collections for the Quarter Quarter $ 78,200 204,800 $ 283,000 $ 1,244,200 2-a. Merchandise purchases budget: Quarter Merchandise Purchases Budget January February March Budgeted cost of goods sold 234,600* $ 352,800 Add desired ending inventory 88,2007 Total needs 322,800 352,800 Less beginning inventory 58,650 Required purchases $ 264,150 $ 352,800 $ 0 Check Figure: Total Merchandise Purchases for the Quarter $ 0 $ 739,800 *$391,000 sales