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: $ 60,000 216,000 60,750 370,000 Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Common stock $ 91,125 500,000 115,625 $ 706,750 Retained earnings $ 706,750 b. Actual sales for December and budgeted sales for the next four months are as follows: $ 270,000 $ 405,000 $ 602,000 $ 317,000 $ 213,000 December (actual) January February March April 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, $35,000 per month: advertising, $61,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,300 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 $3,000 cash. During March, other equipment will be purchased for cash at a cost of $80,000. 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. 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

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 11CE: Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted...
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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:
$ 60,000
216,000
60,750
370,000
Cash
Accounts receivable
Inventory
Buildings and equipment (net)
Accounts payable
$ 91,125
500,000
115,625
$ 706,750
Common stock
Retained earnings
$ 706,750
b. Actual sales for December and budgeted sales for the next four months are as follows:
$ 270,000
$ 405,000
$ 602,000
$ 317,000
$ 213,000
December(actual)
January
February
March
April
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, $35,000 per month: advertising, $61,000 per month; shipping, 5%
of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be
$45,300 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 $3,000 cash. During March, other equipment will be
purchased for cash at a cost of $80,000.
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.
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.
Transcribed Image Text: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: $ 60,000 216,000 60,750 370,000 Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable $ 91,125 500,000 115,625 $ 706,750 Common stock Retained earnings $ 706,750 b. Actual sales for December and budgeted sales for the next four months are as follows: $ 270,000 $ 405,000 $ 602,000 $ 317,000 $ 213,000 December(actual) January February March April 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, $35,000 per month: advertising, $61,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,300 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 $3,000 cash. During March, other equipment will be purchased for cash at a cost of $80,000. 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. 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.
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, $35,000 per month: advertising, $61,000 per month; shipping, 5%
of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be
$45,300 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 $3,000 cash. During March, other equipment will be
purchased for cash at a cost of $80,000.
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.
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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2A
Required 2B
Required 3
Required 4
Required 5
Complete the Schedule of expected cash collections:
Schedule of Expected Cash Collections
January
February
March
Quarter
Cash sales
$
81,000
$
81,000
Credit sales
216,000
216,000
Total collections
$ 297,000 $
0 $
$ 297,000
< Required 1
Required 2A
>
Transcribed Image Text: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, $35,000 per month: advertising, $61,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,300 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 $3,000 cash. During March, other equipment will be purchased for cash at a cost of $80,000. 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. 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 2B Required 3 Required 4 Required 5 Complete the Schedule of expected cash collections: Schedule of Expected Cash Collections January February March Quarter Cash sales $ 81,000 $ 81,000 Credit sales 216,000 216,000 Total collections $ 297,000 $ 0 $ $ 297,000 < Required 1 Required 2A >
Expert Solution
Step 1
1)                       Schedule of Expected cash collections                       
      January Feburary March Quarter
Cash sales    $         81,000  $      120,400  $         63,400  $          264,800
Credit sales    $      216,000  $      324,000  $      481,600  $       1,021,600
total collections     $      297,000  $      444,400  $      545,000  $       1,286,400
             
Accounts receivable at march 31= 317,000*80%=253,600    
             
2-a)   Merchandise purchase budget    
       January   Feburary   March   Quarter 
budgeted cost of goods sold  $      243,000  $      361,200  $      190,200  $          794,400
Add:Ending inventory  $         90,300  $         47,550  $         31,950  $            31,950
total needs     $      333,300  $      408,750  $      222,150  $          826,350
less Beginning inventory  $         60,750  $         90,300  $         47,550  $            60,750
Required purchases     $      272,550  $      318,450  $      174,600  $          765,600
             
2-b) Schedule of Expected cash disbursement for Merchandise purchase
       January   Feburary   March   Quarter 
December purchases    $         91,125      $            91,125
january purchases    $      136,275  $      136,275    $          272,550
Feburary purchases      $      159,225  $      159,225  $          318,450
march purchases        $         87,300  $            87,300
total cash disbursement for purchases  $      227,400  $      295,500  $      246,525  $          769,425
             
Accounts payable= 87,300        
             
       Hillyard Company     
3)      Cash budget       
       January   Feburary   March   Quarter 
Beginning cash balance  $         60,000  $         30,200  $         31,940  $            60,000
Add cash collections    $      297,000  $      444,400  $      545,000  $       1,286,400
total cash available    $      357,000  $      474,600  $      576,940  $       1,346,400
less cash disbursements        
purchase of inventory  $      227,400  $      295,500  $      246,525  $          769,425
selling and adm expense  $      128,400  $      144,160  $      121,360  $          393,920
purchase of equipment  $                 -    $           3,000  $         80,000  $            83,000
cash dividends    $         45,000  $                 -    $                 -    $            45,000
total cash disbursement  $      400,800  $      442,660  $      447,885  $       1,291,345
Excess(Deficiency) of cash  $       (43,800)  $         31,940  $      129,055  $            55,055
Financing            
Borrowings    $         74,000  $                 -    $                 -    $            74,000
Repayments    $                 -    $                 -    $       (74,000)  $           (74,000)
interest      $                 -    $                 -    $         (2,220)  $             (2,220)
       $                 -    $                 -    $                 -    $                     -  
total financing    $         74,000  $                 -    $       (76,220)  $             (2,220)
ending cash balance     $         30,200  $         31,940  $         52,835  $            52,835
             
  interest expense = 74000*1%*3      
       $           2,220      
             
4)      Hillyard Company     
       Income Statement     
       For the Quarter Ended March 31   
Sales (405,000+602000+317000)      $       1,324,000
cost of goods sold          
Beginning invnetory      $         60,750    
Add purchases      $      765,600    
cost of goods avaialble     $      826,350    
less ending inventory      $         31,950    $          794,400
Gross profit          $          529,600
Selling and administrative exp        
Salaries and wages (35000*3)    $      105,000    
Advertising  (61000*3)    $      183,000    
shiiping 5% of sales      $         66,200    
other expense 3% of sales    $         39,720    
Depreciation       $         45,300    $          439,220
operating income           $            90,380
less interest expense         $              2,220
Net income           $            88,160
             
5)   Hillyard Company      
    Balance sheet      
    31-Mar        
Assets            
current assets          
cash            $            52,835
Account receivable          $          253,600
inventory            $            31,950
total current assets          $          338,385
buildings and Equipment (net)  (370,000+3,000+80,000-45300)   $          407,700
total assets          $          746,085
             
liabilities & stockholders Equity        
current liabilities          
Accounts payable          $            87,300
total current liabilities        $            87,300
Stockholders Equity          
common stock          $          500,000
Retained earnings  (115625+88160-45000)      $          158,785
total stockholders equity        $          658,785
total liabilities & stockholders equity      $          746,085
             
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