Hillyard Company, an office supplies specialty store, prepares its master budget
ID: 2553314 • Letter: H
Question
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:
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.
Monthly expenses are budgeted as follows: salaries and wages, $28,000 per month: advertising, $68,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $44,180 for the quarter.
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 $2,300 cash. During March, other equipment will be purchased for cash at a cost of $76,500.
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.
$1,265,200
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:
Explanation / Answer
Cash collection: jan feb mar Quarter Sales 398000 595000 309000 1302000 cash sales 79600 119000 61800 260400 Dec 210400 210400 jan 318400 318400 feb 476000 476000 total 290000 437400 537800 1265200 Purchase budget: Jan feb mar COGS 238800 357000 185400 781200 ending invent 89250 46350 30900 Total needs 328050 403350 216300 less:beg invent 59700 89250 46350 Req purch 268350 314100 169950 Cash Disbursement for purchases: Dec 89025 jan 134175 134175 feb 157050 157050 mar 84975 Total 223200 291225 242025 Cash budget: Quarter begin balance 53000 30000 30275 53000 cash collec 290000 437400 537800 1265200 total cash available 343000 467400 568075 1318200 Less: cash disbur: Purchases 223200 291225 242025 756450 salary 28000 28000 28000 84000 advertise 68000 68000 68000 204000 shipping 19900 29750 15450 65100 others 11940 17850 9270 39060 purch machine 2300 76500 78800 dividend 45000 45000 Total disbursement 396040 437125 439245 1272410 Excess of cash over disbur -53040 30275 128830 45790 Minimum bal 30000 30000 30000 Financing 83040 83040 Repayment -83040 -83040 Interest -2491 -2491 Closing balance 30000 30275 43299 43299 Income Statement : Amount $ Sales 1302000 Less: COGS 781200 GP 520800 less: Expenses: Salary 84000 advertise 204000 shipping 65100 others 39060 depreciation 44180 Interest 2491 Total expenses 438831 Net Operating Income 81969
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