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 companys general ledger showed the following account balances:

Cash	$	53,000
Accounts receivable		210,400
Inventory		59,700
Buildings and equipment (net)		363,000
Accounts payable			$	89,025
Common stock				500,000
Retained earnings				97,075
	$	686,100	$	686,100

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

December(actual)	$263,000
January	$398,000
February	$595,000
March	$309,000
April	$206,000

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 companys gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)
e.	Monthly expenses are budgeted as follows: salaries and wages, $28,000 per month: advertising, $68,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $44,180 for the quarter.
f.	Each months ending inventory should equal 25% of the following months cost of goods sold.
g.	One-half of a months 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 $2,300 cash. During March, other equipment will be purchased for cash at a cost of $76,500.
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: SOME ANSWER PROVIDED

Hillyard Company
Schedule of Expected Cash Collections
	January	February	March	Quarter
Cash sales	$79,600	$119,000	$61,800	$260,400
Credit sales	210,400	318,400	476,000	1,004,800
Total collections	$290,000	$437,400	$537,800	$1,265,200

Hillyard Company
Merchandise Purchases Budget
	January	February	March	Quarter
Budgeted cost of goods sold	238,800*	$357,000	$185,400	$781,200
Add desired ending inventory	89,250	46,350	30,900	166,500
Total needs	328,050	403,350	216,300	947,700
Less beginning inventory	59,700	89,250	46,350	30,900
Required purchases	$268,350	$314,100	$169,950	$916,800

Hillyard Company
Schedule of Expected Cash Disbursements for Merchandise Purchases
	January	February	March	Quarter
December purchases	$89,025			$89,025
January purchases	134,175	134,175		268,350
February purchases		2,300		2,300
March purchases			76,500	76,500
Total cash disbursements for purchases	$223,200	$136,475	$76,500	$436,175

Hillyard Company
Cash Budget
	January	February	March	Quarter
Beginning cash balance	$53,000
Add cash collections	290,000	437,400	537,800	1,265,200
Total cash available	343,000	437,400	537,800	1,265,200
Less cash disbursements:
Purchases of inventory	223,200
Selling and administrative expenses	127,840
Purchases of equipment
Cash dividends	45,000
Total cash disbursements	396,040	0	0	0
Excess (deficiency) of cash	(53,040)	437,400	537,800	1,265,200
Financing:
Borrowings
Repayments
Interest
Total financing	0		0	0
Ending cash balance	$(53,040)	$437,400	$537,800	$1,265,200

Hillyard Company
Income Statement
For the Quarter Ended March 31
Cost of goods sold:
	0
		0
		0
Selling and administrative expenses:
		0
		0
		$0