IECK FIGURES February pur chases: $315,000 February ending cash balance: $30,800 PROBLEM 7-7 Comprehensive Master Budget (LO2- CC5, 7, 11, 12; L03 - CC13, 14] Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of 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: Credits Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Capital shares Retained earnings Debits $ 48,000 224,000 60,000 370,000 $ $ 93,000 500,000 109,000 S702.000 S702,000 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) ( January February March April $280,000 400,000 600,000 300,000 200.000 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. $27,000 per month; advertising, S70,000 per month; shipping, 5% of sales, depreciation, $14,000 per month; other expenses, 3% of sales. f. At the end of each month, inventory is to be on hand equal to 25% of the following month's sales needs, stated at cost. g. One-half of a month's inventory purchases are paid for in the month of purchase; the other half are paid for in the following month. Budgeting 329 h. During February, the company will purchase a new copy machine for $1.700 cash. During March other equipment will be purchased for cash at a cost of $84,500. i. During January, the company will declare and pay $45,000 in cash dividends. j. The company must maintain a minimum cash balance of $30,000. An open line of credit is available at a local bank for any borrowing that may be needed during the quarter. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. Borrowings and repayments of principal must be in multiples of $1,000. Interest is paid only at the time of payment of principal The annual interest rate is 12%. (Figure interest on whole months. e..., 1/12.2/12.) Required: Using the preceding data, complete the following statements and schedules for the first quarter: 1. Schedule of expected cash collections 2. Inventory purchases budget. 3. a Schedule of cash disbursements for purchases. b. Schedule of cash disbursements for expenses 4. Cash budget 5. Income statement for the quarter ending March 31 as shown in Schedule 9 in the chapter 6. Balance sheet as of March 31
