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 $ 48,000 206,400 58,950 358,000 $ 87,525 500,000 83,825 $ 671,350 671,350 b. Actual sales for December and budgeted sales for the next four months are as follows December (actual) January February March $ 258,000 $393,000 $590,000 $304,0e0 $ 201,000 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, $23,000 per month: advertising, $63,000 per month, shipping, 5% of sales, other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $43,380 for the quarter 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 $1,800 cash. During March, other equipment will be purchased for cash at a cost of $74,000 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