Master Budget Preparation Chapter 9 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: Debits Credits Cash $ 48,000 Accounts Receivable 224,000 Inventory 60,000 Buildings and Equipment (net) 370,000 Accounts Payable $ 93,000 Capital Stock 500,000 Retained Earnings 109,000 $ 702,000 $ 702,000 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) $ 280,000 January 400.000 February 600,000 March 300,000 April 200,000 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 Docember 31 are a result of December credit sales. d. The company's gross profit rate is 40% of sales. e. Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month: advertising, $70,000 per month; shipping, 5% of sales; depreciation, $14,000 per month; other expense, 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(.e. cost of goods sold). 8 One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. 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. 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 c