In: Accounting
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 | $ | 48,000 | ||
Accounts receivable | 224,000 | |||
Inventory | 60,000 | |||
Buildings and equipment (net) | 370,000 | |||
Accounts payable | $ | 93,000 | ||
Common stock | 500,000 | |||
Retained earnings | 109,000 | |||
$ | 702,000 | $ | 702,000 | |
Actual sales for December and budgeted sales for the next four months are as follows:
December(actual) | $ | 280,000 |
January | $ | 400,000 |
February | $ | 600,000 |
March | $ | 300,000 |
April | $ | 200,000 |
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.
The company’s gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)
Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month: advertising, $70,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,000 for the quarter.
Each month’s ending inventory should equal 25% of the following month’s cost of goods sold.
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 $1,700 cash. During March, other equipment will be purchased for cash at a cost of $84,500.
During January, the company will declare and pay $45,000 in cash dividends.
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 $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Required:
Using the data above, complete the following statements and schedules for the first quarter:
1. Schedule of expected cash collections:
2-a. Merchandise purchases budget:
2-b. Schedule of expected cash disbursements for merchandise purchases:
3. Cash budget:
4. Prepare an absorption costing income statement for the quarter ending March 31.
5. Prepare a balance sheet as of March 31.
As per the given information Hillyard company, an office supplies speciality store, preparing | |||||||
the master budget for the first quarter of the year. | |||||||
1. Schedule of expected cash collections: | 4.Income statement for the quarter ended March 31 | ||||||
Particulars | January | February | March | Particulars | Amount ($) | ||
Cash collected from | Sales for 3 months | 1300000 | |||||
Collected from Cash sales | 80000 | 120000 | 60000 | Less :Cost of goods sold(60% of sales) | 780000 | ||
Opening Acccounts receivbale | 224000 | Gross margin | 520000 | ||||
Collected from January credit sales | 320000 | Other expenses: | |||||
Collected from Feb credit sales | 480000 | Salaries and wages(27000*3) | 81000 | ||||
Advertisement expenses(70000*3) | 210000 | ||||||
304000 | 440000 | 540000 | shipping cost(5% of sales) | 65000 | |||
Other expenses(3% of sales) | 39000 | ||||||
Depreciation | 42000 | ||||||
Interest expense(1% per month) | 2400 | ||||||
2-a. Merchandise Purchases budget: | Total other expenses | 439400 | |||||
Net profit | 80600 | ||||||
Particulars | January | February | March | ||||
Cost of goods sold (60% of sales) | 240000 | 360000 | 180000 | 5.Balance sheet as on March 31 | |||
Closing inventory should be (25% of cost | |||||||
of goods sold of next month) | 90000 | 45000 | 30000 | Assets | |||
330000 | 405000 | 210000 | |||||
Less: Opening inventory | 60000 | 90000 | 45000 | Cash | 42900 | ||
Purchases during the month | 270000 | 315000 | 165000 | Accounts receivable | 240000 | ||
Inventory | 30000 | ||||||
2-b. Schedule of expected cash disbursements for merchandise purchases: | Buildings and equipment net | 414200 | |||||
Particulars | January | February | March | Liabilities | |||
Amount paid for opening accounts payable | 93000 | Accounts payable | 82500 | ||||
Cash paid for january month purchases | 135000 | 135000 | Common stock | 500000 | |||
Cash paid for february month purchases | 157500 | 157500 | Retained earnings | 109000 | |||
Cash paid for march month purchases | 82500 | Add: Profit during the year | 80600 | ||||
228000 | 292500 | 240000 | 189600 | ||||
3. Cash Budget: | Less: Dividends declared | 45000 | |||||
Net retained earnings | 144600 | ||||||
Particulars | January | February | March | Total | 727100 | 727100 | |
Opeing cash balance | 48000 | 30000 | 30800 | ||||
Expected cash collections as per 1 | 304000 | 440000 | 540000 | ||||
352000 | 470000 | 570800 | |||||
Amount paid for purchases as per 2-b | 228000 | 292500 | 240000 | ||||
Expenses paid for other expenses | |||||||
Salaries and wages | 27000 | 27000 | 27000 | ||||
Advertisement expenses | 70000 | 70000 | 70000 | ||||
shipping cost(5% of sales) | 20000 | 30000 | 15000 | ||||
Other expenses(3% of sales) | 12000 | 18000 | 9000 | ||||
Purchase of machine & euipment in cash | 1700 | 84500 | |||||
Payment of dividends | 45000 | ||||||
Total cash disbursements | 402000 | 439200 | 445500 | ||||
Cash balance | -50000 | 30800 | 125300 |
Related SolutionsHillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...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 $ 58,000 Accounts receivable 214,400 Inventory 60,450
Buildings and equipment (net) 368,000 Accounts payable $ 90,525
Common stock 500,000 Retained earnings 110,325 $ 700,850 $ 700,850
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Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...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:
Debits
Credits
Cash
$
48,000
Accounts receivable
224,000
Inventory
60,000
Buildings and equipment (net)
370,000
Accounts payable
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Common stock
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Retained earnings
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Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...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
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Debits
Credits
Cash
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Accounts receivable
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Inventory
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Buildings and equipment
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Accounts payable
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Common stock
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Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...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%u2019s general ledger showed the following account
balances:
Cash $47,000
Accounts receivable $205,600
Inventory $58,800
Buildings and equipment, net $357,000
Accounts payable $87,225
Common stock $500,000
Retained earnings $81175
Actual sales for December and budgeted sales for...
Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...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:
Debits
Credits
Cash
$
42,000
Accounts receivable
201,600
Inventory
58,050
Buildings and equipment (net)
352,000
Accounts payable
$
85,725
Common stock
500,000
Retained earnings
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$
653,650...
Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...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
$
64,000
Accounts receivable
219,200
Inventory
61,350
Buildings and equipment (net)
374,000
Accounts payable
$
92,325
Common stock
500,000
Retained earnings
126,225
$
718,550
$
718,550
Actual sales...
Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...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 $ 61,000
Accounts receivable 216,800
Inventory 60,900
Buildings and equipment (net) 371,000
Accounts payable $ 91,425
Common stock 500,000
Retained earnings 118,275
$ 709,700 $ 709,700
Actual sales...
Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...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 $ 50,000 Accounts receivable 208,000 Inventory 59,250
Buildings and equipment (net) 360,000 Accounts payable $ 88,125
Common stock 500,000 Retained earnings 89,125 $ 677,250 $ 677,250
Actual sales...
Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...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
Common stock 500,000 Retained earnings 115,625 $ 706,750 $ 706,750
Actual sales...
Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The...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
$
64,000
Accounts receivable
219,200
Inventory
61,350
Buildings and equipment (net)
374,000
Accounts payable
$
92,325
Common stock
500,000
Retained earnings
126,225
$
718,550
$
718,550
Actual sales...
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