Question

In: Accounting

Problem 8-31 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an...

Problem 8-31 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10]

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:

  1. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances:

Cash $

59,000

Accounts receivable

215,200

Inventory

60,600

Buildings and equipment (net)

369,000

Accounts payable $

90,825

Common stock

500,000

Retained earnings

112,975

$

703,800

$

703,800

  1. Actual sales for December and budgeted sales for the next four months are as follows:

December(actual) $

269,000

January $

404,000

February $

601,000

March $

316,000

April $

212,000

  1. 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.

  2. The company’s gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)

  3. Monthly expenses are budgeted as follows: salaries and wages, $34,000 per month: advertising, $62,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,140 for the quarter.

  4. Each month’s ending inventory should equal 25% of the following month’s cost of goods sold.

  5. 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.

  6. During February, the company will purchase a new copy machine for $2,900 cash. During March, other equipment will be purchased for cash at a cost of $79,500.

  7. During January, the company will declare and pay $45,000 in cash dividends.

  8. 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.

Required:

Using the data above, complete the following statements and schedules for the first quarter:

1. Schedule of expected cash collections:

2-a. Merchandise purchases budget:

2-b. Schedule of expected cash disbursements for merchandise purchases:

3. Cash budget:

4. Prepare an absorption costing income statement for the quarter ending March 31.

5. Prepare a balance sheet as of March 31.

Solutions

Expert Solution

Solution 1:
Schedule of expected cash collections
Particulars January February March Quarter
Budgeted Sales $404,000.00 $601,000.00 $316,000.00 $1,321,000.00
Cash Sale $80,800.00 $120,200.00 $63,200.00 $264,200.00
Collection for credit sales $215,200.00 $323,200.00 $480,800.00 $1,019,200.00
Total Collections $296,000.00 $443,400.00 $544,000.00 $1,283,400.00
Solution 2a:
Merchandise Purchase Budget
Particulars January February March Quarter
Budgeted Cost of Goods Sold (60% of Sales) $242,400.00 $360,600.00 $189,600.00 $792,600.00
Add: Desired ending merchandise inventory (25% of next month COGS) $90,150.00 $47,400.00 $31,800.00 $31,800.00
Total Needs $332,550.00 $408,000.00 $221,400.00 $824,400.00
Less: Beginning inventory $60,600.00 $90,150.00 $47,400.00 $60,600.00
Required purchases $271,950.00 $317,850.00 $174,000.00 $763,800.00
Solution 2b:
Schedule of expected cash disbursement - Merchandise Purchases
Particulars January February March Quarter
March Purchases $90,825.00 $90,825.00
April Purchases $135,975.00 $135,975.00 $271,950.00
May Purchases $158,925.00 $158,925.00 $317,850.00
June Purchases $87,000.00 $87,000.00
Total Disbursement $226,800.00 $294,900.00 $245,925.00 $767,625.00
Solution 3:
Schedule of expected cash disbursement of Selling and Administrative expenses
Particulars January February March Quarter
Salaries and wages $34,000.00 $34,000.00 $34,000.00 $102,000.00
Advertising $62,000.00 $62,000.00 $62,000.00 $186,000.00
Shipping (5% of sales) $20,200.00 $30,050.00 $15,800.00 $66,050.00
Other expenses (3% of sales) $12,120.00 $18,030.00 $9,480.00 $39,630.00
Total Disbursement $128,320.00 $144,080.00 $121,280.00 $393,680.00
Cash Budget - Hillyard company
Particulars January February March Quarter
Opening Cash balance $59,000.00 $30,880.00 $32,400.00 $59,000.00
Add: Collection from customers $296,000.00 $443,400.00 $544,000.00 $1,283,400.00
Total Cash Available $355,000.00 $474,280.00 $576,400.00 $1,342,400.00
Less - Cash Disbursement:
For Inventory $226,800.00 $294,900.00 $245,925.00 $767,625.00
For Selling and administrative Expenses $128,320.00 $144,080.00 $121,280.00 $393,680.00
For Equipment $0.00 $2,900.00 $79,500.00 $82,400.00
For Cash Dividend $45,000.00 $0.00 $0.00 $45,000.00
Total Cash disbursement $400,120.00 $441,880.00 $446,705.00 $1,288,705.00
Excess (deficiency) of cash available over disbursements -$45,120.00 $32,400.00 $129,695.00 $53,695.00
Financing:
Borrowings $76,000.00 $0.00 $0.00 $76,000.00
Repayments $0.00 $0.00 -$76,000.00 -$76,000.00
Interest $0.00 $0.00 -$2,280.00 -$2,280.00
Total Financing $76,000.00 $0.00 -$78,280.00 -$2,280.00
Ending cash balance $30,880.00 $32,400.00 $51,415.00 $51,415.00
Solution 4:
Absorption costing income statement - Hillyard Company
for quarter ended March 31
Particulars Amount
Sales $1,321,000.00
Cost of goods sold (60%) $792,600.00
Gross profit $528,400.00
Operating expenses:
Salaries and wages $102,000.00
Advertising $186,000.00
Shipping (5% of sales) $66,050.00
Other expenses (3% of sales) $39,630.00
Depreciation $45,140.00
Total operating expenses $438,820.00
Operating income $89,580.00
Interest expense $2,280.00
Net Income $87,300.00
Solution 5:
Balance Sheet- Hillyard Company
31-Mar
Particulars Amount
Assets:
Cash $51,415.00
Accounts receivables ($316000*80%) $252,800.00
Inventory $31,800.00
Building and equipment, net ($369000 +$2,900+ $79,500- $45140) $406,260.00
Total Assets $742,275.00
Liabilities and stockholder's Equity:
Accounts payable (174000*50%) $87,000.00
Common Stock $500,000.00
Retained Earnings ($112,975 + $87,300- $45000) $155,275.00
Total liabilities and stockholders equity $742,275.00

Related Solutions

Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office...
Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] 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: Cash $ 44,000 Accounts receivable 203,200 Inventory 58,350 Buildings and equipment (net) 354,000 Accounts payable $ 86,325...
Problem 8-31 (REV) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an...
Problem 8-31 (REV) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] 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: Cash $ 60,000 Accounts receivable 216,000 Inventory 60,750 Buildings and equipment (net) 370,000 Accounts payable $...
Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office...
Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] 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: Cash $ 60,000 Accounts receivable 216,000 Inventory 60,750 Buildings and equipment (net) 370,000 Accounts payable $ 91,125...
Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office...
Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] 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: Cash $ 54,000 Accounts receivable 211,200 Inventory 59,850 Buildings and equipment (net) 364,000 Accounts payable $ 89,325...
Problem 8-29 (REV) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data...
Problem 8-29 (REV) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:     Current assets as of March 31: Cash$ 7,500 Accounts receivable$ 20,000 Inventory$ 39,600 Building and equipment, net$ 127,200 Accounts payable$ 23,550 Common stock$ 150,000 Retained earnings$ 20,750 The gross margin is 25% of sales. Actual and budgeted sales data:     March (actual)$50,000 April$66,000 May$71,000 June$96,000 July$47,000 Sales are 60% for...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 7,200 Accounts receivable $ 18,800 Inventory $ 37,800 Building and equipment, net $ 123,600 Accounts payable $ 22,425 Common stock $ 150,000 Retained earnings $ 14,975 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 47,000 April $...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 8,000 Accounts receivable $ 22,000 Inventory $ 42,600 Building and equipment, net $ 130,800 Accounts payable $ 25,425 Common stock $ 150,000 Retained earnings $ 27,975 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 55,000 April $...
Problem 8-27 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-27 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:      Current assets as of March 31:      Cash $ 8,000      Accounts receivable $ 20,000      Inventory $ 36,000   Building and equipment, net $ 120,000   Accounts payable $ 21,750   Capital stock $ 150,000   Retained earnings $ 12,250    a. The gross margin is 25% of sales. b. Actual and budgeted sales data:      March...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 7,400 Accounts receivable $ 19,600 Inventory $ 39,000 Building and equipment, net $ 126,000 Accounts payable $ 23,175 Common stock $ 150,000 Retained earnings $ 18,825 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 49,000 April $...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 8,700 Accounts receivable $ 24,800 Inventory $ 46,800 Building and equipment, net $ 116,400 Accounts payable $ 28,050 Common stock $ 150,000 Retained earnings $ 18,650 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 62,000 April $...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT