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:

1. 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

2. 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

3. 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.

4. The companys gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)

5. 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.

6. Each months ending inventory should equal 25% of the following months cost of goods sold.

7. One-half of a months inventory purchases is paid for in the month of purchase; the other half is paid in the following month.

8. 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.

9. During January, the company will declare and pay $45,000 in cash dividends.

10. 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:

2-a. Merchandise purchases budget:

2-b. Schedule of expected cash disbursements for merchandise purchases:

3. Cash budget:

4. Prepare an absorption costing income statement for the quarter ending March 31.

5. Prepare a balance sheet as of March 31.

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 Merchandise Purchases Budget January February March Quarter Budgeted cost of goods sold $238,800* $ 357,000 $ 185,400 $ 781,200 Add desired ending inventory 89,2507 46,350 30,900 30,900 Total needs 328,050 403,350 216,300 812,100 Less beginning inventory 59,700 89,250 46,350 59,700 Required purchases $ 268,350 $ 314,100 $ 169,950 $ 752,400 *$398,000 sales * 60% cost ratio = $238,800. +$357,000 ~ 25% = $89,250. 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 157,050 157,050 314,100 March purchases 84,975 84,975 Total cash disbursements for purchases $ 223,200 $ 291,225 $ 242,025 $ 756,450 March Quarter Hillyard Company Cash Budget January February $ 53,000 $ 30,960 $ 290,000 437,400 343,000 468,360 Beginning cash balance Add collections from customers 31,235 $ 537,800 569,035 53,000 1,265,200 1,318,200 Total cash available Less cash disbursements: Inventory purchases Selling and administrative expenses Equipment purchases 223,200 127,840 291,225 143,600 2,300 242,025 120,720 756,450 392,160 78,800 76,500 Cash dividends 45,000 0 0 45,000 Total cash disbursements 396,040 437,125 439,245 1,272,410 (53,040) 31,235 129,790 45,790 Excess (deficiency) of cash Financing: Borrowings Repayments 84,000 0 0 0 0 Interest 0 0 (84,000) (2,520) (86,520) 43,270 $ 84,000 (84,000) (2,520) (2,520) 43,270 Total financing 84,000 Ending cash balance $ 30,960 $ 31,235 $ Hillyard Company Income Statement For the Quarter Ended March 31 Sales $ 1,302,000 Cost of goods sold: Beginning inventory 520,800 Purchases Goods available for sale 520,800 Ending inventory 520,800 781,200 Selling and administrative expenses: 0 781,200 $ 781,200 Prepare a balance sheet as of March 31. Hillyard Company Balance Sheet March 31 Assets Current assets: Total current assets 0 Total assets 0 Liabilities and Stockholders' Equity Current liabilities: Stockholders' equity: 0 Total liabilities and stockholders' equity $ 0