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 companyâs general ledger showed the following account balances:
Debit Credit Cash $ 52,000 Accounts receivable 209,600 Inventory 59,550 Buildings and equipment (net) 362,000 Accounts payable $ 88,725 Common stock 500,000 Retained earnings 94,425 $ 683,150 $ 683,150
Actual sales for December and budgeted sales for the next four months are as follows:
December(actual) $ 262,000 January $ 397,000 February $ 594,000 March $ 308,000 April $ 205,000
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 companyâs 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, $67,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $44,020 for the quarter.
Each monthâs ending inventory should equal 25% of the following monthâs cost of goods sold.
One-half of a monthâs 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 $2,200 cash. During March, other equipment will be purchased for cash at a cost of $76,000.
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:
*$397,000 sales à 60% cost ratio = $238,200.
â $356,400 Ã 25% = $89,100.
2-b. Schedule of expected cash disbursements for merchandise purchases:
3. Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
4. Prepare an absorption costing income statement for the quarter ending March 31.
5. Prepare a balance sheet as of March 31.
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 companyâs general ledger showed the following account balances:
| Debit | Credit | ||||||
| Cash | $ | 52,000 | |||||
| Accounts receivable | 209,600 | ||||||
| Inventory | 59,550 | ||||||
| Buildings and equipment (net) | 362,000 | ||||||
| Accounts payable | $ | 88,725 | |||||
| Common stock | 500,000 | ||||||
| Retained earnings | 94,425 | ||||||
| $ | 683,150 | $ | 683,150 | ||||
Actual sales for December and budgeted sales for the next four months are as follows:
| December(actual) | $ | 262,000 | |
| January | $ | 397,000 | |
| February | $ | 594,000 | |
| March | $ | 308,000 | |
| April | $ | 205,000 | |
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 companyâs 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, $67,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $44,020 for the quarter.
Each monthâs ending inventory should equal 25% of the following monthâs cost of goods sold.
One-half of a monthâs 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 $2,200 cash. During March, other equipment will be purchased for cash at a cost of $76,000.
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:
*$397,000 sales à 60% cost ratio = $238,200.
â $356,400 Ã 25% = $89,100.
2-b. Schedule of expected cash disbursements for merchandise purchases:
3. Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
4. Prepare an absorption costing income statement for the quarter ending March 31.
5. Prepare a balance sheet as of March 31.
Related questions
Hillyard Company, an office supplies specialty store, preparesits master budget on a quarterly basis. The following data havebeen assembled to assist in preparing the master budget for thefirst quarter:
As of December 31 (the end of the prior quarter), the companyâsgeneral ledger showed the following account balances:
| Cash | $ | 53,000 | ||
| Accounts receivable | 210,400 | |||
| Inventory | 59,700 | |||
| Buildings and equipment(net) | 363,000 | |||
| Accounts payable | $ | 89,025 | ||
| Common stock | 500,000 | |||
| Retained earnings | 97,075 | |||
| $ | 686,100 | $ | 686,100 | |
Actual sales for December and budgeted sales for the next fourmonths are as follows:
| December(actual) | $ | 263,000 |
| January | $ | 398,000 |
| February | $ | 595,000 |
| March | $ | 309,000 |
| April | $ | 206,000 |
Sales are 20% for cash and 80% on credit. All payments on creditsales are collected in the month following sale. The accountsreceivable at December 31 are a result of December creditsales.
The companyâs 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,$28,000 per month: advertising, $68,000 per month; shipping, 5% ofsales; other expenses, 3% of sales. Depreciation, includingdepreciation on new assets acquired during the quarter, will be$44,180 for the quarter.
Each monthâs ending inventory should equal 25% of the followingmonthâs cost of goods sold.
One-half of a monthâs inventory purchases is paid for in themonth of purchase; the other half is paid in the followingmonth.
During February, the company will purchase a new copy machinefor $2,300 cash. During March, other equipment will be purchasedfor cash at a cost of $76,500.
During January, the company will declare and pay $45,000 in cashdividends.
Management wants to maintain a minimum cash balance of $30,000.The company has an agreement with a local bank that allows thecompany to borrow in increments of $1,000 at the beginning of eachmonth. The interest rate on these loans is 1% per month and forsimplicity we will assume that interest is not compounded. Thecompany would, as far as it is able, repay the loan plusaccumulated interest at the end of the quarter.
Required:
Using the data above, complete the following statements andschedules for the first quarter:
1. Schedule of expected cash collections:
2-a. Merchandise purchases budget:
2-b. Schedule of expected cash disbursements for merchandisepurchases:
3. Cash budget:
4. Prepare an absorption costing income statement for thequarter ending March 31.
5. Prepare a balance sheet as of March 31.
In this assignment you are goingto prepare elements of the master budget for Hancock Company usingthe following information. You should prepare individually theanswers to the following. You should have a cover page and typeyour answers in excel or word.
Hancock Company, a merchandisingcompany, prepares its master budget on a quarterly basis. Thefollowing data have been assembled to assist in preparation of themaster budget for the second quarter.
a. As of December 31(the end of the prior quarter), the companyâs balance sheet showedthe following account balances:
Cash | $ 6,700 | |||
Accounts receivable | 36,900 | |||
Inventory | 11,130 | |||
Buildings and equipment (net) | 120,000 | |||
Accounts payable | $ 32,880 | |||
Common stock | 100,000 | |||
Retained earnings |
| 41,850 | ||
$174,730 | $174,730 | |||
b. Actual andbudgeted sales are as follows:
December (actual) | $61,500 |
January | $79,500 |
February | $88,800 |
March | $89,400 |
April | $58,100 |
c. Sales are 40% forcash and 60% on credit. All payments on credit sales are collectedin the month following the sale. The accounts receivable atDecember 31 are a result of December credit sales.
d. The companyâs grossmargin percentage is 30% of sales. (In other words, cost of goodssold is 70% of sales.)
e. Each monthâs endinginventory should equal 20% of the following month's budgeted costof goods sold.
f. One-quarter of a monthâsinventory purchases is paid for in the month of purchase; the otherthree-quarters are paid for in the following month. The accountspayable at December 31 are the result of December purchases ofinventory.
g. Monthly expenses areas follows: commissions, $12,150; rent, $2,650; other expenses(excluding depreciation), 8% of sales. Assume that these expensesare paid monthly. Depreciation is $2,550 for the quarter andincludes depreciation on new assets acquired during thequarter.
h. Equipment will beacquired for cash: $3,830 in January and $8,100 in February.
i. Management would like to maintaina minimum cash balance of $5,000 at the end of each month. Thecompany has an agreement with a local bank that allows the companyto borrow in increments of $1,000 at the beginning of each month,up to a total loan balance of $50,000. The interest rate on theseloans is 1% per month, and for simplicity, we will assume thatinterest is not compounded. The company would, as far as it isable, repay the loan plus accumulated interest at the end of thequarter.
