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 As of December 31 (the end of the prior quarter), the companys general ledger showed the following account balances Cash $ 48,000 Accounts receivable 206,400 Inventory 58,950 Buildings and equipment (net) 358,000 Accounts payable $ 87,525 Common stock 500,000 Retained earnings 83,825 $ 671,350 $ 671,350 b Actual sales for December and budgeted sales for the next four months are as follows December(actual) $ 258,000 January $ 393,000 February $ 590,000 March $ 304,000 April $ 201,000 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 companys gross margin is 40 of sales (In other words, cost of goods sold is 60 of sales ) Monthly expenses are budgeted as follows salaries and wages, $23,000 per month advertising, $63,000 per month shipping, 5 of sales other expenses, 3 of sales Depreciation, including depreciation on new assets acquired during the quarter, will be $43,380 for the quarter Each months ending inventory should equal 25 of the following months cost of goods sold One half of a months inventory purchases is paid for in the month of purchase the other half is paid in the following month During February, the company will purchase a new copy machine for $1,800 cash During March, other equipment will be purchased for cash at a cost of $74,000 During January, the company will declare and pay $45,000 in cash dividends 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

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 09, 2024

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

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

Cash

48,000

Accounts receivable

206,400

Inventory

58,950

Buildings and equipment (net)

358,000

Accounts payable

87,525

Common stock

500,000

Retained earnings

83,825

671,350

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


December(actual)	$	258,000
January	$	393,000
February	$	590,000
March	$	304,000
April	$	201,000
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 companys gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.) Monthly expenses are budgeted as follows: salaries and wages, $23,000 per month: advertising, $63,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $43,380 for the quarter. Each months ending inventory should equal 25% of the following months cost of goods sold. One-half of a months inventory purchases is paid for in the month of purchase; the other half is paid in the following month. During February, the company will purchase a new copy machine for $1,800 cash. During March, other equipment will be purchased for cash at a cost of $74,000. During January, the company will declare and pay $45,000 in cash dividends. 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.