Question

Hi! Can I please have help with Question 3 and the part of the cash budget that I got wrong? Thank you!

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of 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: Credits Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Capital shares Retained earnings Debits $ 50,000 216,000 58,500 365,000 $ 94,000 490,000 105,500 $689,500 $689,500 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March April $270,000 390,000 580,000 250,000 190,000 f. 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. e. Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month; advertising, $71,000 per month; shipping, 5% of sales, depreciation, $15,000 per month; other expenses, 3% of sales. At the end of each month, inventory is to be on hand equal to 25% of the following month's sales needs, stated at cost. g. One-half of a month's inventory purchases are paid for in the month of purchase; the other half are paid for in the following month. h. During February, the company will purchase a new copy machine for $3,000 cash. During March, other equipment will be purchased for cash at a cost of $84,000. i. During January, the company will declare and pay $46,000 in cash dividends. j. The company must maintain a minimum cash balance of $31,000. An open line of credit is available at a local bank for any borrowing that may be needed during the quarter. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. Borrowings and repayments of principal must be in multiples of $1,000. Interest is paid only at the time of payment of principal. The annual interest rate is 12%. (Figure interest on whole months, e.g., 1/12, 2/12.)

Answer 1

3)	Schedule of cash disbursement for operating expenses
					January	Feburary	March	Quarter
	Salaries & wages				27,000	27,000	27,000	81,000
	Advertising				71,000	71,000	71,000	213,000
	Shipping				19500	29000	12500	61000
	other expenses				11700	17400	7500	36600
	total cash disbursement for operating exp				129,200	144,400	118,000	391,600

			January	Feburary	March	Quarter
Beginning cash balance			50,000	31,550	31650	50,000
Add cash collections			294000	428000	514000	1236000
total cash available			344,000	459550	545650	1,286,000
less cash disbursements
purchase of inventory			225,250	280500	219750	725,500
operating expense			129200	144400	118000	391600
purchase of equipment			0	3,000	84,000	87000
cash dividends			46,000	0	0	46,000
total cash disbursement			400,450	427900	421750	1,250,100
Excess(Deficiency) of cash			-56,450	31650	123900	35,900
Financing
Borrowings			88,000	0	0	88,000
Repayments			0	0	-88,000	-88000
interest			0	0	-2,640	-2640
			0	0	0	0
total financing			88,000	0	-90640	-2,640
ending cash balance			31,550	31650	33260	33,260
	interest expense = 88000*1%*3
			2640
4)			income statememt
Sales						1220000
cost of goods sold
Beginning invnetory				58,500
Add purchases				702,000
cost of goods avaialble				760,500
less ending inventory				28,500		732,000
Gross profit						488,000
Selling and administrative exp
Salaries and wages				81,000
Advertising				213,000
shiiping 5% of sales				61000
other expense 3% of sales				36600
Depreciation				45,000		436,600
operating income						51,400
less interest expense						2,640
Net income						48,760
5)		Balance sheet
Asses
current assets
cash						33260
Account receivable						200,000
inventory						28,500
total current assets						261,760
buildings and Equipment (net)						407,000
total assets						668,760
liabilities & stockholders Equity
current liabilities
Accounts payable						70,500
total current liabilities						70,500
Stockholders Equity
common stock						490,000
Retained earnings		(86,475+102830-45000)				108,260
total stockholders equity						598,260
total liabilities & stockholders equity						668,760