Hillyard Company, an office supplies speclalty 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:

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

c$.$ Sales are $20\%$ for cash and $80\%$ on credit. All payments on credit sales are collected in the month following sale. The accounts

recelvable at December $31$ are a result of December credit sales.

d$.$ The company's gross margin is $40\%$ of sales. $($In other words, cost of goods sold is $60\%$ of sales.$)$

e$.$ Monthly expenses are budgeted as follows: salarles and wages, $$18,000$ per month: advertising. $$58,000$ per month; shipping. $5\%$

of sales; other expenses, $3\%$ of sales. Depreclation, Including depreclation on new assets acquired during the quarter, will be

$$42,580$ 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 Irventory purchases is pald for in the month of purchase; the other half is pald in the following month.

h$.$ During February, the company will purchase a new copy machine for $$1,300$ cash. During March, other equlpment will be purchased

for cash at a cost of $$71,500.$

During January, the company will declare and pay $$45,000$ In cash dlvidends.

j$.$ Management wants to malntain 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 wll 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:

Schedule of expected cash collections:

$2-$a$.$ Merchandise purchases budget:

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

Cash budget:

Prepare an absorption costing Income statement for the quarter ending March $31.$

Prepare a balance sheet as of March $31.$

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