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:
1. As of December 31, (the end of the prior quarter), the company’s
general ledger showed the following account balances:
Cash $48,000 (debit)
Accounts receivable $224,000 (debit)
Inventory $60,000 (debit)
Buildings and equipment, net $370,000 (debit)
Accounts payable $93,000 (credit)
Capital stock $500,000 (credit)
Retained earnings $109,000 (credit)
2. Actual sales for December and budgeted sales for the next four months
are as follows: December $280,000, January $400,000, February $600,000,
March $300,000 and April $200,000.
3. 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.
4. The company’s gross margin is 40% of sales. (In other words,
cost of goods sold is 60% of sales.)
5. Monthly expenses are budgeted as follows: salaries and wages,
$27,000 per month; advertising, $70,000 per month; shipping, 5% of sales; other
expenses, 3% of sales. Depreciation, including depreciation on new assets
acquired during the quarter, will be $42,000 per quarter.
6. Each month’s ending inventory should equal 25% of the following
month’s cost of goods sold.
7. One-half of the month’s inventory purchases is paid for in the month
of purchase; the other half is paid in the following month.
8. 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.
9. During January, the company will declare and pay $45,000 in cash
dividends.
10. 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. Submit your responses in an Excel spreadsheet:
1. Schedule of expected cash collections
Schedule of Expected Cash Collections
January February March Quarter
Cash sales $80,000
Credit sales $224,000
Total Collections $304,000
2. Merchandise Purchases Budget
January February March Quarter
Budgeted Cost of Goods Sold* 240000
Add desired ending inventory** $90,000
Total needs $330,000
Less beginning inventory $60,000
Required purchases $270,000
*$400,000 sales x 60% cost ratio = $240,000
** $360,000 x 25% = $90,000
3. Schedule of expected cash disbursements-merchandise purchases
January February March Quarter
December purchases $93,000
January purchases $135,000
February purchases
March purchases
Total disbursements $228,000
4. Schedule of expected cash disbursements-selling and administrative
expenses
January February March Quarter
Salaries and wages $27,000
Advertising $70,000
Shipping $20,000
Other expenses $12,000
Total disbursements $129,000
5. Cash budget:
January February March Quarter
Cash balance, beginning $48,000
Add cash collections $304,000
Total cash available 352,000
Less cash disbursements
For inventory $228,000
For selling and admin expenses $129,000
For purchase of equipment 0
For cash dividends $45,000
Total cash disbursements 402,000
Excess (deficiency) of cash ($50,000)
Financing needed $80,000
Cash balance, ending 30,000
Provide your answers in a clearly organized Excel spreadsheet. Provide
your answers in a clearly organized Excel spreadsheet.
TUTORIAL PREVIEW
|
Schedule of Expected Cash Collections
|
||||
|
|
January
|
February
|
March
|
Quarter
|
|
Cash sales
|
$80,000
|
120,000
|
60,000
|
$260,000
|
|
Credit sales
|
$224,000
|
320,000
|
480,000
|
$1,024,000
|
file name: Hillyard
Company.xls File type: .xls PRICE: $15
