Hillyard Company, an office supplies specialty store, prepares its master budget

Question

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: ts Skipped Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Common stock Retained earnings 54,000 211,200 59,850 364,000 eBook Print eferences $ 89,325 500,000 99,725 689,050 689,050 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March April $264,000 $399,000 $596,000 $311,000 $207,000

Explanation / Answer

Solution: Hillyard Company Sales Budget For the Quarter ended March 30, January February March Quarter Budgeted Sales in Dollars 399000 596000 311000 1306000 Total Budgeted Sales 399000 596000 311000 1306000 Hillyard Company Expected Cash Collection For the Quarter ended March 30, January February March Quarter Account Receivable 12/31 211200 211200 January-Sales 20% of 399000 79800 79800 80% of 399000 319200 319200 February- Sales 20% of 596000 119200 119200 80% of 596000 476800 476800 March -Sales 20% of 311000 62200 62200 Total Cash Collection 291000 438400 539000 1268400 Hillyard Company Inventory Purchase Budget For the Quarter ended March 30 January February March Quarter Budgeted Cost of Goods Sold(60% of Sales) 239400 357600 186600 783600 Add: Desired Ending Inventory(25% of Next Month's COGS) 89400 46650 31050 31050 Total Needs 328800 404250 217650 814650 Less: Beginning Inventory 59850 89400 46650 59850 Required Inventory Purchase 268950 314850 171000 754800 Hillyard Company Cash Disbursement for Purchase For the Quarter ended March 30 January February March Quarter December Purchase 89325 89325 January Purchase(50% 0f 268950) 134475 134475 268950 February Purchase(50% 314850) 157425 157425 314850 March Purchase(50% of 171000) 85500 85500 Total cash Disbursement for Purchase 223800 291900 242925 758625 Hillyard Company Cash Disbursement for operating Expenses For the Quarter ended March 30, January February March Quarter Salaries and Wages 29000 29000 29000 87000 Advertising 67000 67000 67000 201000 Shipping (5% of Sales) 19950 29800 15550 65300 Other Expenses(3% of Sales) 11970 17880 9330 39180 Total Cash Disbursement 127920 143680 120880 392480 Hillyard Company Cash Budget For the Quarter ended March 30 January February March Quarter Beginning Cash Balance 54000 30000 30420 54000 Add: Cash Collection 291000 438400 539000 1268400 Total Cash Available 345000 468400 569420 1322400 Less: Cash Disbursement Inventory Purchase 223800 291900 242925 758625 Operating Expense 127920 143680 120880 392480 Equipment Purchase 0 2400 77000 79400 Cash Dividend 45000 0 0 45000 Total Cash Disbursement 396720 437980 440805 1275505 Excess/Deficiency -51720 30420 128615 46895 Financing: Borrowing 81720 81720 Repayments 0 -81720 -81720 Interest(76200*12%*3/12) 0 -2452 -2452 Total Financing 81720 0 -84172 -2452 Ending Cash Balance 30000 30420 44443 44443 Hillyard Company Budgeted Income Statement For the Quarter ended March 30 Sales 1306000 Less:Cost of goods sold 783600 Gross Margin 522400 Less:Operating Expenses 392480 Depreciation 44340 Operating Income 85580 Less:Interest Expense 2452 Net Income 83128 Hillyard Company Budgeted Balance Sheet For the Quarter ended March 31 Current Assets Cash 44443 Account Receivable(80%*311000) 248800 Inventory 31050 Total Current Assets 324293 Building and Equipment 399060 (364000+2400+77000-44340) Total Assets 723353 Liabilities and Equity Account Payable(50% of 17100) 85500 Equity: Common Stock 500000 Retained Earnings: Beginning 99725 add:Net Income 83128 Total 182853 Less:Cash Dividend 45000 137853 Total Liability and Equity 723353

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