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, gathered the following information to prepare its master budget for the first quarter of the year: 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 $ 60,000 216,000 Credits 60,750 370,000 $ 91,125 500,000 115,625 $ 706,750 $ 706,750 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March April $ 270,000 $ 405,000 $ 602,000 $ 317,000 $ 213,000 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. (In other words, cost of goods sold is 60% of sales.) e. Monthly expenses are budgeted as follows: salaries and wages, $35,000 per month; advertising, $61,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,300 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 $3,000 cash. During March, other equipment will be purchased for cash at a cost of $80,000. 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 allowing it 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 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: 1. Schedule of expected cash collections: 2-a. Merchandise purchases budget: 2-b. Schedule of expected cash disbursements for merchandise purchases: 3. Cash budget: 4. Prepare an absorption costing income statement for the quarter ending March 31. 5. Prepare a balance sheet as of March 31. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 2B Required 3 Required 4 Required 5 Complete the merchandise purchases budget: Budgeted cost of goods sold Add desired ending inventory Total needs Less beginning inventory Required purchases Merchandise Purchases Budget January February March $243,000* $ 361,200 $ 190,200 Quarter $ 794,400 90,300+ 47,550 333,300 408,750 60,750 90,300 190,200 47,550 794,400 60,750 $ 272,550 $ 318,450 $ 142,650 $ 733,650 *$405,000 sales 60% cost ratio = $243,000. +$361,200 25% = $90,300. < Required 1 Required 2B > Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 2B Required 3 Required 4 Required 5 Complete the schedule of expected cash disbursements for merchandise purchases. Schedule of Expected Cash Disbursements for Merchandise Purchases January February March Quarter December purchases 91,125 $91,125 January purchases 136,275 136,275 272,550 February purchases 159,225 159,225 318,450 March purchases 159,225 159,225 $ $ Total cash disbursements for purchases $295,500 227,400 318,450 841,350 < Required 2A Required 3 > Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 2B Required 3 Required 4 Required 5 Complete the cash budget. Note: Cash deficiency, repayments and interest should be indicated by a minus sign. Hillyard Company Cash Budget January February March Quarter Beginning cash balance $ 60,000 Add collections from customers 297,000 Total cash available 357,000 0 Less cash disbursements: Inventory purchases 227,400 Selling and administrative expenses 128,400 Equipment purchases Cash dividends 45,000 Total cash disbursements 400,800 0 Excess (deficiency) of cash (43,800) 0 0 0 Financing: Borrowings Repayments Interest Total financing Ending cash balance 0 $ (43,800) < Required 2B 0 0 $ 0 $ 0 0 Required 4 > Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 2B Required 3 Required 4 Required 5 Prepare an absorption costing income statement for the quarter ending March 31. Hillyard Company Income Statement For the Quarter Ended March 31 Cost of goods sold: Selling and administrative expenses: 0 0 0 0 0 0 < Required 3 Required 5 > Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 2B Required 3 Required 4 Required 5 Prepare a balance sheet as of March 31. Current assets: Total current assets Hillyard Company Balance Sheet March 31 Assets 0 Total assets 0 Liabilities and Stockholders' Equity Current liabilities: Stockholders' equity: Total liabilities and stockholders' equity < Required 4 0 0 Required 5