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 Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payabl Common stock Retained earnings S 49,000 207,200 59,100 359,000 $87,825 500,000 86,475 ble $ 674,300 $ 674,300 b Actual sales for December and budgeted sales for the next four months are as follows December(actual) January February March April $259,000 $394,000 $591,000 $305,000 $202,000

Explanation / Answer

1. Schedule of expected cash collections

2-a Merchandise purchase budget

Working notes

For feb

COGS = 591000 x 60% = 354600

closing inventory = COGS of March x 25%

= 305000 x 60% x 25% = 45750

For march

COGS = 305000 x 60% = 183000

closing inventory = COGS of April x 25%

= 202000 x 60% x 25% = 30300

2-b Schedule of expected cash disbursements for merchandises purchased

January February March Quarter Cash sales 78800 118200 61000 258000 Credit sales 207200 315200 472800 995200 Total collections 286000 433400 533800 1253200

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