Hillyard Company an office supplies specialty store prepares

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the first quarter:

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the first quarter:

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of 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 Debits 49,000 224,000 57,000 356,000 Credits as Accounts receivable Inventory Buildings and equipment (net) Accounts payable Capital shares Retained earnings $ 93,000 485,000 108,000 $686,000 686,000 b. Actual sales for December and budgeted sales for the next four months are as follows December (actual) January February March 280,000 380,000 540,000 250,000 180 000 c. 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 d. The company\'s gross margin is 40% of sales e. Monthly expenses are budgeted as follows: salaries and wages, $25,000 per month; advertising $71,000 per month, shipping, 5% of sales, depreciation, $13,000 per month; other expenses, 3% of f. At the end of each month, inventory is to be on hand equal to 25% of the following month\'s sales needs. g. One-half of a month\'s inventory purchases are paid for in the month of purchase; the other half are paid h. During February, the company will purchase a new copy machine for $6,200 cash. During March, other i. During January, the company will declare and pay $47,000 in cash dividends stated at cost for in the following month equipment will be purchased for cash at a cost of $78,000 j. The company must maintain a minimum cash balance of $32,000. An open line of credit is available at a local bank for any borrowing that may be needed during the quarter. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. Borrowings and repayments of principal must be in multiples of $1,000. Interest is paid only at the time of payment of principal. The annual interest rate is 12%. Figure interest on whole months, e g 1/12, 212 Required: Using the preceding data, complete the following statements and schedules for the first quarter: 1. Schedule of expected cash collections HILLYARD COMPANY Schedule of Expected Cash Collections January February March Quarter R OO

Solution

Cash Budget

January

February

March

Quarter

Cash Balance Beginning

$    49,000.00

$        32,600.00

$    32,950.00

$        49,000.00

Add: Collection from Sales

$ 300,000.00

$      412,000.00

$ 482,000.00

$ 1,194,000.00

Total Cash Available

$ 349,000.00

$      444,600.00

$ 514,950.00

$ 1,243,000.00

Deduct: Disbursements

Purchase of Equipment

$          6,200.00

$    78,000.00

$        84,200.00

Purchase if Inventory

$ 219,000.00

$      266,250.00

$ 210,000.00

$      695,250.00

Operating Expenses

$ 126,400.00

$      139,200.00

$ 116,000.00

$      381,600.00

Cash Dividends

$    47,000.00

$        47,000.00

Total Disbursements

$ 392,400.00

$      411,650.00

$ 404,000.00

$ 1,208,050.00

Excess (deficiency) of cash

$ (43,400.00)

$        32,950.00

$ 110,950.00

$        34,950.00

Financing

     Borrowing

$    76,000.00

$        76,000.00

     repayments

$    78,280.00

$        78,280.00

     Interest

$          760.00

$              760.00

$          760.00

$          2,280.00

Total Financing

$    76,760.00

$              760.00

$ (77,520.00)

$                       -  

  

Cash Balance Ending

$    32,600.00

$        32,950.00

$    32,670.00

$        32,670.00

Hillyard Company

Income Statement

For the Quarter Ended March 31

Sales

$ 1,170,000.00

Deduct :Cost of Goods Sold

Beginning Inventory

$    57,000.00

Add: Purchases

$ 672,000.00

Goods available for sales

$ 729,000.00

Deduct: Ending Inventory

$    27,000.00

$      702,000.00

Gross margin

$      468,000.00

Deduct :Operating Expenses

Advertising

$ 213,000.00

Depreciation

$    39,000.00

Other Expenses

$    35,100.00

Salaries and Wages

$    75,000.00

Shipping

$    58,500.00

$      420,600.00

Net Operating Income

$        47,400.00

Interest expenses

$          2,280.00

Net Income

$        45,120.00

Hillyard Company

Balance Sheet

For the Quarter Ended March 31

Assets

Current Assets

Inventory

$        27,000.00

Cash

$        32,670.00

Accounts Receivable

$      200,000.00

Total Current Assets

$     259,670.00

Building and equipment (net)

$      401,200.00

Total Assets

$      660,870.00

Liabilities and Shareholder\'s Equity

Current Liabilities

Accounts payable

$        69,750.00

Shareholder\'s equity

capital shares

$      485,000.00

Retained earnings

$      106,120.00

Total shareholder\'s equity

$      591,120.00

Total Liabilities and Shareholder\'s Equity

$      660,870.00

Cash Budget
	January	February	March	Quarter
Cash Balance Beginning	$    49,000.00	$        32,600.00	$    32,950.00	$        49,000.00
Add: Collection from Sales	$ 300,000.00	$      412,000.00	$ 482,000.00	$ 1,194,000.00
Total Cash Available	$ 349,000.00	$      444,600.00	$ 514,950.00	$ 1,243,000.00
Deduct: Disbursements
Purchase of Equipment		$          6,200.00	$    78,000.00	$        84,200.00
Purchase if Inventory	$ 219,000.00	$      266,250.00	$ 210,000.00	$      695,250.00
Operating Expenses	$ 126,400.00	$      139,200.00	$ 116,000.00	$      381,600.00
Cash Dividends	$    47,000.00			$        47,000.00
Total Disbursements	$ 392,400.00	$      411,650.00	$ 404,000.00	$ 1,208,050.00
Excess (deficiency) of cash	$ (43,400.00)	$        32,950.00	$ 110,950.00	$        34,950.00
Financing
Borrowing	$    76,000.00			$        76,000.00
repayments			$    78,280.00	$        78,280.00
Interest	$          760.00	$              760.00	$          760.00	$          2,280.00
Total Financing	$    76,760.00	$              760.00	$ (77,520.00)	$                       -
Cash Balance Ending	$    32,600.00	$        32,950.00	$    32,670.00	$        32,670.00