Hillyard Company, an office supplies specialty store, prepares its master budget
ID: 2445817 • Letter: H
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:
As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances:
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.
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.
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.
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.
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.
Merchandise purchases budget:
Schedule of expected cash disbursements for merchandise purchases:
Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
Prepare an absorption costing income statement for the quarter ending March 31.
Prepare a balance sheet as of March 31.
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:
Explanation / Answer
December 2014 (Amount in $) January 2015 (Amount in $) February 2015 (Amount in $) March 2015 (Amount in $) April 2015 (Amount in $) Opening Cash Balance 60000 30200 31940 Expected Cash Receipts: Cash Sales 54000 81000 120400 63400 42600 Collection of accounts receivable 216000 324000 481600 253600 Other income 0 0 0 Total cash collected 357000 474600 576940 Expected cash payments: Purchase 136275 159225 87300 Paying of Accounts Payable 91125 136275 159225 87300 Salaries & Wages 35000 35000 35000 Advertising 61000 61000 61000 Shipping 20250 30100 15850 Other Expenses 12150 18060 9510 Purchase of Machinery & Equip 0 3000 80000 Principal Repayment 0 0 74000 Interest Due 0 0 1480 Dividend Payable 45000 0 0 Taxes Payable 0 0 Other payments 0 0 Total cash expenses 400800 442660 523365 Cash surplus (or deficit) -43800 31940 53575 Minimum Desired Cash Balance 30000 30000 30000 External Financing 74000 0 0 Cash Balance Ending 60000 30200 31940 53575 Particulars December 2014 (Amount in $) January 2015 (Amount in $) February 2015 (Amount in $) March 2015 (Amount in $) April 2015 (Amount in $) Cost of Goods Sold 162000 243000 361200 190200 127800 Add: Closing Stock 60750 90300 47550 31950 Less: Opening Stock 60750 90300 47550 Purchase 272550 318450 174600 Hillyard Company Quarterly Income Statement Quarter ended March 31, 2015 (Amount in $) Net sales 13,24,000.00 Cost of goods sold 7,94,400.00 Beginning Inventory 60,750.00 Add: Purchase 7,65,600.00 Cost of goods available for sale 8,26,350.00 Less: Closing Inventory 31,950.00 Gross profits 5,29,600.00 Selling and administrative expenses 3,93,920.00 Variable Expenses 1,05,920.00 Fixed Expenses 2,88,000.00 Net operating income 1,35,680.00 Hillyard Company Balance Sheet March 31, 2015 (Amount in $) Assets Cash 53,575.00 Accounts receivable 2,53,600.00 Inventory 31,950.00 Total current assets 3,39,125.00 Gross fixed assets 4,53,000.00 Accumulated depreciation 45,300.00 Net fixed assets 4,07,700.00 Total assets 7,46,825.00 Liabilities Bank loan 0.00 Accounts payable 87,300.00 Accrued expenses 0.00 Current portion long-term debt 0.00 Taxes payable 0.00 Total current liabilities 87,300.00 Long-term debt 0.00 Shareholders' equity 5,00,000.00 Retained Earnings 1,59,525.00 Total liabilities and equity 7,46,825.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.