Problem 8-31 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 43,000 202,400 58,200 353,000 $ 86,025 500,000 70,575 656,600 $ 656,600 $ b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March April $ 253,000 $ 388,000 $ 585,000 $ 299,000 $ 196,000 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, $18,000 per month: advertising, $58,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,580 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 $1,300 cash. During March, other equipment will be purchased for cash at a cost of $71,500. i. Durina Januarv. the company will declare and pay $45.000 in cash dividends. for cash at a cost of $71,500. 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 loca the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans i and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay t accumulated interest at the end of the quarter. Required: Jsing 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: 3. Cash budget: 7. 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 Cash sales $ 77,600 $ 77,600 $ 117,000 Credit sales 202,400 310,400 468,000 Total collections $ 280,000 $ 388,000 $ 585,000 Quarter $ 272,200 980,800 253.000 Required 1 Required 2A > Required 1 Required 2A Required 2B Required 3 Required 4 Required 5 Complete the merchandise purchases budget: Merchandise Purchases Budget January February Budgeted cost of goods sold 232,800* $ 351,000 Add desired ending inventory 87,750+ 44,850 Total needs 320,550 395,850 Less beginning inventory 58,200 87,750 Required purchases $ 262,350 $ 308,100 *$388,000 sales * 60% cost ratio = $232,800 $351,000 25% = $87,750. March $ 179,400 49,000 228,400 44,850 $ 183,550 Quarter $ 763,200 181,600 944,800 190,800 $ 754,000 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: 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 Liabilities and Stockholders' Equity Current liabilities: Stockholders' equity: Total liabilities and stockholders' equity 0