Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 8 - 3 1 ( Algo ) Completing a Master Budget [ LO 8 - 2 , LO 8 - 4 , LO 8

Problem 8-31(Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10]
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:
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
receivable 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: salaries and wages, $27,000 per month: advertising, $67,000 per month; shipping, 5%
of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be
$44,020 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 inventory purchases is paid for in the month of purchase; the other half is paid in the following month.
h. During February, the company will purchase a new copy machine for $2,200 cash. During March, other equipment will be
purchased for cash at a cost of $76,000.
i. During January, the company will declare and pay $45,000 in cash dividends.
j. 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:
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.Problem 8-29(Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Problem 8-29(Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31 : [[Cash,9,400
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting Concepts And Applications For Managerial Decision Making

Authors: Ralph S. Polimeni, James A. Cashin, Frank J. Fabozzi, Arthur H. Adelberg

2nd Edition

0070103100, 978-0070103108

More Books

Students also viewed these Accounting questions