Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

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: Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Common stock Retained earnings $ 40,000 200,eee 57,750 35e, Bee $ 85,125 See, eee 62,625 $ 647,750 $ 647,750 b. Actual sales for December and budgeted sales for the next four months are as follows: December(actual) January February March April $ 250,00 $ 385,000 $ 582,080 $ 296,080 $ 193,80 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. $15,000 per month: advertising. $55.000 per month; shipping, 5% of sales: other expenses. 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter will be $42,100 for the quarter. f. Each month's ending inventory should equal 25% of the following month's cost of goods sold. 9. 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 $1.000 cash. During March other equipment will be purchased for cash at a cost of $70,000. 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: 1. Schedule of expected cash collections: 2-a. Merchandise purchases budget: 2- 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. 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 collections: Schedule of Expected Cash Collections January February March s Cash sales 77,000 Quarter $ 77.000 200,000 0 $ 277,000 Credit sales Total collections 200.000 $ 277,000 S 0 s > Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 28 Required 3 Required 4 Required 5 Complete the merchandise purchases budget: Merchandise Purchases Budget March Quarter Budgeted cost of goods sold Add desired ending inventory Total needs January February $231,000 $ 349,200 87,3007 318,300 349,200 0 0 S 340,200 s 0 $ 0 Less beginning inventory 57.750 Required purchases 260.550 *$385,000 sales x 60% cost ratio = $231.000. +$349 200 x 25% = 587.300 pe here to search DI 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 December purchases $ 85.125 January purchases 130,275 130.275/ February purchases March purchases Total cash disbursements for purchases $ 215,400 $130.275 S Quarter 85,125 260.550 0 345,875 Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 28 Required 3 Required 4 Required 5 0 Complete the cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Hillyard Company Cash Budget January February March Quarter Beginning cash balance S 40.000 Add collections from customers 277,000 Total cash available 317.000 0 0 Less cash disbursements: Inventory purchases 215,400 Selling and administrative expenses 100.800 Equipment purchases Cash dividends 45.000 Total cash disbursements 361.200 0 0 Excess (deficiency) of cash (44,200) 0 0 0 Financing: Borrowings Repayments 0 Interest 0 0 0 Total financing Ending cash balance $ (44,200) $ $ 0 s 0 Required 1 Required 2A Required 2B Required 3 Required 4 Required 5 Prepare a balance sheet as of March 31. Hillyard Company Balance Sheet March 31 Assets Current assets: Total current assets Total assets s 0 Liabilities and Stockholders' Equity Current liabilities: Stockholders' equity 0 Total liabilities and stockholders' equity $

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_2

Step: 3

blur-text-image_3

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

Forensic Analytics Methods And Techniques For Forensic Accounting Investigations

Authors: Mark J. Nigrini

1st Edition

0470890460, 978-0470890462

More Books

Students also viewed these Accounting questions