Hillyard1Hillyard 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:2As of December 31 (the end of the prior quarter), the companys general ledger showed the following account BalancesDebitsCreditsCash48000Account Receivable224000Inventory60000Building and Equipment370000Account Payable93000Capital Stock500000Retained Earnings109000Totals$7020007020003Actual sales for December and budgeted sales for the next four months are as follows:Dec-10$280,000Jan-11400000Feb-11600000Mar-11300000Apr-112000003Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month followingsale. The accounts receivable at December 31 are a result of December credit sales.4The companys gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)5Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month: advertising, $70,000per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation onnew assets acquired during the quarter, will be $42,000 for the quarter.6Each months ending inventory should equal 25% of the following months cost of goods sold.7One-half of a months inventory purchases is paid for in the month of purchase; the other half is paidin the following month.8During 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 $84,500.9During January, the company will declare and pay $45,000 in cash dividends.10Management wants to maintain a minimum cash balance of $30,000. The company has an agreementwith a local bank that allows the company to borrow at the beginning of eachmonth. The interest rate on these loans is 12% per month and for simplicity we will assume that interestis not compounded. The company would, as far as it is able, repay the loan plus accumulated interestat the end of the quarter.Solution:Hillyard CompanySales BudgetFor the Quarter ended March 30,2011JanuaryFebruaryMarchQuarterBudgeted Sales in Dollars4000006000003000001300000Total Budgeted Sales4000006000003000001300000Hillyard CompanyExpected Cash CollectionFor the Quarter ended March 30,2011JanuaryFebruaryMarchQuarterAccount Receivable 12/31(80% of 280000)224000224000January-11 Sales20%of400000800008000080%of400000320000320000February-2011 Sales20%of60000012000012000080%of600000480000480000March -2011 Sales20%of3000006000060000Total Cash Collection3040004400005400001284000Hillyard CompanyInventory Purchase BudgetFor the Quarter ended March 30,2011JanuaryFebruaryMarchQuarterBudgeted Cost of Goods Sold(60% of Sales)240000360000180000780000Add: Desired Ending Inventory(25% of Next Month's COGS)90000450003000030000Total Needs330000405000210000810000Less: Beginning Inventory60000900004500060000Required Inventory Purchase270000315000165000750000Hillyard CompanyCash Disbursement for PurchaseFor the Quarter ended March 30,2011JanuaryFebruaryMarchQuarterDecember Purchase9300093000January Purchase(50% 0f 270000)135000135000270000February Purchase(50% 315000)157500157500315000March Purchase(50% of 165000)8250082500Total cash Disbursement for Purchase228000292500240000760500*Account Payable of December -2010 for Purchase Tk93000 will be paid in January-2011Hillyard CompanyCash Disbursement for operating ExpensesFor the Quarter ended March 30,2011JanuaryFebruaryMarchQuarterSalaries and Wages27000270002700081000Advertising700007000070000210000Shipping (5% of Sales)20000300001500065000Other Expenses(3% of Sales)1200018000900039000Total Cash Disbursement129000145000121000395000Hillyard CompanyCash BudgetFor the Quarter ended March 30,2011JanuaryFebruaryMarchQuarterBeginning Cash Balance48000300003080048000Add: Cash Collection3040004400005400001284000Total Cash Available3520004700005708001332000Less: Cash DisbursementInventory Purchase228000292500240000760500Operating Expense129000145000121000395000Equipment Purchase017008450086200Cash Dividend450000045000Total Cash Disbursement4020004392004455001286700Excess/Deficiency-500003080012530045300Financing:Borrowing8000080000Repayments0-80000-80000Interest(80000*12%*3/12)0-2400-2400Total Financing800000-82400-2400Ending Cash Balance30000308004290042900Hillyard CompanyBudgeted Income StatementFor the Quarter ended March 30,2011Sales1300000Less:Cost of Goods Sold780000Gross Margin520000Less:Operating Expenses395000Depreciation42000Operating Income83000Less:Interest Expense2400Net Income80600Hillyard CompanyBudgeted Balance SheetFor the Quarter ended March 30,2011Current AssetsCash42900Account Receivable(80% of 300000)240000Inventory30000Total Current Assets312900Building and Equipment414200(Beginning 370000+New purchase 86200-Depreciation 42000)Total Assets727100Liabilities and EquityAccount Payable(50% of 165000)82500Equity:Common Stock500000Retained Earnings:Beginning109000add:Net Income80600Total189600Less:Cash Dividend45000144600Total Liability and Equity727100

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