Hillyard Company, an office supplies specialty store, prepares its master budget
ID: 2467673 • 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, $15,000 per month: advertising, $55,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,100 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 $1,000 cash. During March, other equipment will be purchased for cash at a cost of $70,000.
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.
Garrison 15e Recheck 2015-01-16
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
Schedule of cash Collections
Jan
Feb
March
Cash sales @20%
77,000
116,400
59,200
December 250,000@80%
200,000
Jan sales @80%
308,000
Feb sales @80%
465,600
Total cash collection
$277,000
$424,400
$524,800
2A) Merchandise purchase budget
Jan
Feb
March
COGS @60% of sales
231,000
349,200
177,600
Add: closing inventory @25%
87,300
44,400
28,950
Less : opening inventory
(57,750)
(87,300)
(44,400)
Purchases
$260,550
$306,300
$162,150
b) Schedule of cash disbursements
Jan
Feb
March
December
85,125
Jan
130,275
130,275
Feb
153,150
153,150
March
81,075
Total
$215,400
283,425
234,225
C) Cash Budget
Jan
Feb
arch
Opening
40,000
30,800
54,215
Add : Collection
277,000
424,400
524,800
Total collection
317,000
455,200
579,015
Disbursement
Cash purchase
215,400
283,425
234,225
Salaries and wages
15,000
15,000
15,000
Advertising
55,000
55,000
55,000
Shipping
19,250
29,100
14,800
Other expenses
11,550
17,460
8,880
Machine
1,000
70,00
Dividend
45,000
Total disbursement
361,200
400,985
397,905
Excess(deficiency)
(44,200)
54,190
181,110
Financing:
Borrowing
75,000
Repayment
(75,000)
Interest
(2,250)
Total financing
75,000
77,250
Cash at end
30,800
54,215
103,860
Income statement
Sales
1,263,000
Less : cost of goods sold
-757,800
Gross profit
505,200
Less : operating
Salaries and wages
45,000
Advertising
165,000
shipping
63,150
Other expenses
37,880
Depreciation
42,100
Interest expense
2,250
355,380
Net income
149,820
Balance sheet
Cash 103,860
Account receivable 236,800
Inventory 28,950
Building net 378,900
Account payable
81,075
Common stock
500,000
Retained earnings
167,445
Total 748,510
748,520
Jan
Feb
March
Cash sales @20%
77,000
116,400
59,200
December 250,000@80%
200,000
Jan sales @80%
308,000
Feb sales @80%
465,600
Total cash collection
$277,000
$424,400
$524,800
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.