PROBLEM 829 Completing a Master Budget [L08-2, L08-4, L08-7, L08-8, L08-9, L08-10] 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: Cash Accounts receivable Inventory ... Buildings and equipment (net) Accounts payable Common stock Retained earnings Debits Credits $ 48,000 224,000 60,000 370,000 $ 93,000 500,000 109,000 $702,000 $702,000 b. Actual sales for December and budgeted sales for the next four months are as follow Sales are 20% for cash and 80 o credit. All payments on credit sales are collected in the December (actual January February March April $280.000 $400,000 $600,000 $300,000 $200,000 c. d. following sale. The accounts receivable at December 31 are a result of December credited The company's gross margin is 40% of sales. (In other words, cost of goods sold is ook sales.) Monthly expenses are budgeted as follows salaries and wages. $27.000 per month achie ing. $70,000 per month; shipping. 5% of sales, other expenses, 3% of sales. Depreciation including depreciation on new assets acquired during the quarter, will be $42.000 for quarter f. Each month's ending inventory should equal 25% of the following month's cost of goodik One-half of a month's inventory purchases is paid for in the month of purchase, the other her is paid in the following month. 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. Management wants to maintain a minimum cash balance of $30,000. The company has a 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 tepay 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: h. February March Cash sales Credit sales Total cash collections January $ 80.000 224,000 $304.000 2. Merchandise purchases budget: March Quarter February $360,000 Budgeted cost of goods sold Add desired ending inventory Total needs. Less beginning inventory Required purchases January $240.000 90,000+ 330,000 60.000 $270.000 *5400,000 sales x 60 costat - $240,000 $360,000 x 25% -590,000 Schedule of expected cash disbursements for merchandise purchases: February March January $ 93,000 135.000 December purchases January purchases February purchases March purchases Total cash disbursements for purchases 135.000 $ 3.000 270.000 $228.000 udgeting 3. Cash budget: January February March Quarter $ 48,000 304,000 352,000 Beginning cash balance Add cash collections .. Total cash available Less cash disbursements: Purchases of inventory Selling and administrative expenses Purchases of equipment Cash dividends Total cash disbursements Excess (deficiency) of cash. Financing: Etc. 228,000 129,000 45,000 402,000 (50,000) 4. Prepare an absorption costing income statement for the quarter ending March 31 as shown in Schedule 9 in the chapter. 5. Prepare a balance sheet as of March 31