Question

Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] 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: $ Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Common stock Retained earnings 53,000 210,400 59,700 363,000 $ 89,025 500,000 97,075 686,100 $ 686,100 $ b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March $ 263,000 $ 398,000 $ 595,000 $ 309,000 $206,000 April

Answer 1

Answer to Part 1. Cash Sales Collection from Credit Sales Total Cash Collections Schedule of Expected Cash Collections January February March Quarter 79600 119000 61800 260400 210400 3184004760001004800 290000 437400537800 1265200 Answer to Part 2. Budgeted Cost of goods sold Add: Desired Ending Inventory Total Needs Less: Beginning Inventory Required Purchases Merchandise Purchases Budget January February 238800 357000 89250 46350 328050 403350 59700 89250 268350314100 March Quarter 185400 781200 30900 30900 216300 812100 46350 59700 169950752400 Schedule of Expected Cash Disbursements - Merchandise Purchases January February March December Purchases 89025 January Purchases 1341 75 134175 February Purchases 157050 157050 March Purchases 84975 Total Disbursements 2232002 91225 242025 Quarter 89025 268350 314100 84975 756450

March Quarter Answer to Part 3. Cash Disbursements for Expenses January February Salaries and Wages 28000 28000 Advertising 68000 68000 Shipping 19900 29750 Other Expenses 11940 17850 Total Cash Disbursements for Expenses 127840 143600 28000 68000 15450 9270 120720 84000 204000 65100 39060 392160 January 53000 290000 343000 February 30960 437400 468360 March 31235 53 7800 569035 Quarter 53000 1265200 1318200 223200 291225 2300 24 2025 76500 Cash Budget Beginning Cash Balance Add: Cash Collections Total Cash Available Less: Cash Disbursements For Inventory For Equipment For Cash Dividends For Expenses Total Cash Disbursements Excess (Deficiency) of Cash Financing: Borrowings Repayments Interest Total Financing Ending Cash Balance 45000 127840 396040 -53040 756450 78800 45000 392160 1272410 45790 143600 437125 120720 439245 31235 129790 84000 0 -84000 -2520 -86520 43270 84000 -84000 -2520 -2520 43270 84000 30960 31235

130 2000 Answer to Part 4 Hillyard Company Income Statement For the Quarter Ended March 31 Sales Cost of Goods sold Beginning Inventory 59700 Purchases 752400 Goods available for Sale 812100 Ending Inventory 30900 Cost of Goods sold Gross Profit Selling and Administrative Expenses: Salaries and Wages 84000 Advertising 204000 Shipping 65100 Other Expenses 39060 Depreciation 44180 Total Selling and Adminitrative Expenses Net Operating Income Interest Expense Net Income 781200 520800 436340 84460 2520 81940

Answer to Part 5. Hillyard Company Balance Sheet March 31 Assets Current Asstes: Cash 43270 Accounts Receivable 247200 Inventory 30900 Total Current Assets Building and Equipment, net Total Assets Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable Stockholders' Equity: Common Stock 500000 Retained Earnings 134015 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 321370 397620 718990 84975 634015 718990