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Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis

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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:

Debits CASH $48,000 (D) ACCOUNTS RECEIVABLE $224,000 (D) INVENTORY $60,000 (D) BUILDINGS AND EQUIPMENT (NET) $370,000 (D)
Credits ACCOUNTS PAYABLE $93,000 (C) COMMON STOCK $500,000 (C) RETAINED EARNINGS $109,000 (C) Total Debit $702,000 Total Credit $702,000

b.) 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

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, $27,000 per month: advertising, $70,000 per month; shipping, 5% of sales; depreciation, $14,00p per month; other expenses, 3% of sales.

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 $1,700 cash. During March, other equipment will be purchased for cash at a cost of $84,500.

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. An open lone of credot is available at a local bank for any borrowing that may be needed during the quarter. All borrowing is done at the beginning of month, and all repayments are made at the end of a month. Borrowing and repayments of principal must be in increments of $1,000. Interest is paid only at the time of payment t of principal. The annual interest rate is 12% ( Figure interest on whole months. e.g. 1/12, 2/12)

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

1. SCHEDULE OF EXPECTED CASH

2.a ) Inventory purchase budget:

b.) Schedule of cash disbursements for purchases:

3.) Schedule of cash disbursements for expenses:

4. )Cash budget:

5.) Prepare an income statement for the quarter ending March 31.

6.) Prepare a balance sheet as of March 31.