Hillyard Company, an office supplies specialty store, prepares its master budget
ID: 2545746 • 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, $37,000 per month: advertising, $59,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,620 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 $3,200 cash. During March, other equipment will be purchased for cash at a cost of $81,000.
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
Answer a Sales Budget Jan Feb March Total Sales in Units 407,000 604,000 319,000 1,330,000 Cash Sales - 20% 81,400 120,800 63,800 266,000 Credit Sales - 80% 325,600 483,200 255,200 1,064,000 Answer b Schedule of Expected Cash Collections from Sales Jan Feb March Total Cash Sales 81,400 120,800 63,800 266,000 Collection from Accounts Receivables Dec Sales 217,600 217,600 Jan Sales 325,600 325,600 Feb Sales 483,200 483,200 Total cash Collections 299,000 446,400 547,000 1,292,400 Answer c Merchandise Purchase Budget Jan Feb March Total Cost of Goods Sold - 60% 244,200 362,400 191,400 798,000 Add: Closing Inventory -25% 90,600 47,850 32,250 32,250 Total Needs 334,800 410,250 223,650 830,250 Less: opening Inventory in uints (61,050) (90,600) (47,850) (61,050) Required Purchases 273,750 319,650 175,800 769,200 Answer d Schedule of Cash payments to Suppliers Jan Feb March Total Cash Payment Accounts Payable - Dec 91,725 91,725 Jan Purchases 136,875 136,875 273,750 Feb Purchases 159,825 159,825 319,650 Mar Purchases 87,900 87,900 Total Cash Payment to Suppliers 228,600 296,700 247,725 773,025 Answer e Schedule of Cash payments of Selling & Admn. Budget Jan Feb March Total Salaries & Wages 37,000 37,000 37,000 111,000 Advertising 59,000 59,000 59,000 177,000 Shipping - 5% of Sales 20,350 30,200 15,950 66,500 Other Expense - 3% of Sales 12,210 18,120 9,570 39,900 - Total 128,560 144,320 121,520 394,400 Cash budget Jan Feb March Total Opening cash Balance 62,000 30,840 33,020 62,000 Add: receipts Collection from Customers 299,000 446,400 547,000 1,292,400 Total Cash available 361,000 477,240 580,020 1,354,400 Less: Disbursements Cash Disbursement - Accounts Payable 228,600 296,700 247,725 773,025 Selling & Admn. Exp. 128,560 144,320 121,520 394,400 Purchase of Equipment - 3,200 81,000 84,200 Dividend Paid 45,000 - - 45,000 Total Disbursement 402,160 444,220 450,245 1,296,625 Excess (deficiency) of Cash (41,160) 33,020 129,775 57,775 Add: Finance from Bank 72,000 72,000 Less: Payment to Bank - - (72,000) (72,000) Less: Payment of interet - Bank loan - - (2,160) (2,160) Total Financing 72,000 - (74,160) (2,160) Net Cash Balance Closing 30,840 33,020 55,615 55,615 Income Statement For the Qtr Ending Mar 31 Sales 1,330,000 Cost of Goods Sold - 60% 798,000 Gross Margin 532,000 Less: Selling & Admn. Exp. Salaries & Wages 111,000 Advertising 177,000 Shipping - 5% of Sales 66,500 Other Expense - 3% of Sales 39,900 Dep. 45,620 440,020 Operating Profit 91,980 Less: Interest Expenses 2,160 Net Income 89,820 Balance Sheet As on March 31 Assets Current Assets Cash 55,615 Accounts receivables 255,200 Inventory 32,250 343,065 Fixed Assets Building & Equipment 372,000 Add: Purchases 84,200 Less: Dep. (45,620) 410,580 Total Assets 753,645 Liabilities Accounts Payable 87,900 Total liabilities 87,900 Shareholders's Equity Common Stock 500,000 Retained Earnings 165,745 Total Stockholders equity 665,745 Total liabilities & Stockholders' Equity 753,645 - Schedule of Retained Earnings As on Mar 31 Opening Balance 120,925 Add: net income 89,820 Less: Dividend declared (45,000) Closing Balance 165,745
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