Question

*Please show work on how you got the answer for any calclualtions in Income Statemnet and the Balance sheet. (Also I could not fit the entire Balance sheet chart on it, so it is suppose to be longer) 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

a.

As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: cash 64000 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 718550 718550 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) 274,000 January 409,000 February 606,000 March 321,000 April 217,000 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. (In other words, cost of goods sold is 60% of sales.) e. Monthly expenses are budgeted as follows: salaries and wages, $39,000 per month: advertising, $57,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,940 for the quarter. f. Each month’s ending inventory should equal 25% of the following month’s cost of goods sold. g. 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. h. During February, the company will purchase a new copy machine for $3,400 cash. During March, other equipment will be purchased for cash at a cost of $82,000. i. During January, the company will declare and pay $45,000 in cash dividends. j. 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.

Using the data above, complete the following statements and schedules for the first quarter:
1.	2-b. Schedule of expected cash disbursements for merchandise purchases: Schedule of Expected Cash disbursements January February March Quarter December purchases 93,325 0 0 92,325 January purchases 137,475 137,475 0 274,950 February purchases 160,425 160,425 320,850 March Purchases 0 88,500 88,500 Total cash disbursements for purchases 229,800 297,900 248,925 776,625

3.

Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Cash Budget January February March Quarter Beg Cash balance 64,000 30,480 33,100 64,000 Add cash collections 301,000 448,400 549,000 1,298,400 Total Cash available 365,000 478,880 582,100 1,362,400 Less cash disbursements Purchase of inventory 229,800 297,900 248,925 776,625 Selling and administrative expense 128,720 144,480 121,680 394,880 Purchase of equipment 3,400 82,000 85,400 Cash dividends 45,000 0 0 45,000 Total cash disbursements 403,520 445,780 452,605 1,301,905 Excess (deficiency) of cash (38,520) 33,100 129,495 60,495 Financing: Borrowings 69,000 0 0 69,000 Repayments 0 0 (69,000) (69,000) Interest 0 0 (2,070) (2,070) Total financing 69,000 (71,070) (2,070) Ending cash balance 30,480 33,100 58,425 58,425 4. Prepare an absorption costing income statement for the quarter ending March 31. Income Statement       For the Quarter Ended March 31 Sales Cost of Goods sold: Gross Margin Selling and administrative expenses: Salaries and wages Advertising Shipping Other expenses Net Operating income interest expense Net Icome 5. Prepare a balance sheet as of March 31 Balance sheet March 31 Assets Current assets Total Current assets Current Liabilities Stockholder's Equity Total liablilites and stockholders equity

Answer 1

Income Statement
For the quarter ended Mar 31
Sales		1,336,000
(409000+606000+321000)
Cost of Goods Sold		801,600
(60% of sales)
Gross Margin		534,400
Selling and Administrative expenses:
Salaries and Wages (39000*3)	117,000
Advertising (57000*3)	171,000
Shipping (5% of Sales)	66,800
Other Expenses (3% of Sales)	40,080
Depreciation	45,940	440,820
Net Operating Income		93,580
Interest Expense from cash budget		2,070
Net Income		91,510

Balance Sheet
Mar-31
Assets
Current Assets
Cash (cash budget)	58,425
Accounts Receivable	256,800
(March credit Sales)
Inventory	32,550
(217000*60%*25%)
Total Current Assets		347,775
Building and Equipment (net)		413,460
(374000+3400+82000-45940)
Total Assets		761,235
Current Liabilities
Accounts Payable	88500
Total Current Liabilitites		88500
Common Stock	500000
Retained Earnings	172735
(126225+91510-45000)
Stockholders' Equity		672735
Total Stockholders' Equity and Liabilities		761235

Sales Budget
	Jan	Feb	March	Total
Sales	409000	606000	321000	1336000
Cash Sales (20%)	81800	121200	64200	267200
Credit Sales (80%)	327200	484800	256800	1068800