PROBLEM 9–28 Completing a Master Budget IN EXCEL WORKSHEET 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:
Debits Credits Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 48,000
Accounts receivable . . . . . . . . . . . . 224,000 Inventory . . . . . . . . .
. . . . . . . . . . . . 60,000 Buildings and equipment (net) . . . . 370,000
Accounts payable . . . . . . . . . . . . . . $ 93,000 Capital stock . . . . . .
. . . . . . . . . . . . 500,000 Retained earnings . . . . . . . . . . . . .
109,000 $702,000 $702,000 b. Actual sales for December and budgeted sales for
the next four months are as follows: December (actual) . . . . . . $280,000
January . . . . . . . . . . . . . . $400,000 February . . . . . . . . . . . . .
$600,000 March. . . . . . . . . . . . . . . . $300,000 April . . . . . . . . . .
. . . . . . . $200,000 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. (In other words, cost of goods sold is 60% of sales.) e. 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 for the quarter. f. Each month’s ending inventory should equal
25% of the following month’s cost of goods sold. g. 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. h. 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. i. During January, the company will declare and pay
$45,000 in cash dividends. j. 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: 1. Schedule of expected cash collections: Jan. Feb March Quarter Cash sales . . . . . . . . . . . . . . . . . . . $
80,000 Credit sales . . . . . . . . . . . . . . . . . 224,000 Total cash
collections . . . . . . . . .. $304,000 2. a. Merchandise purchases budget: Jan.
Feb. March Qt. Budgeted cost of goods sold . . . . . $240,000* $360,000 Add
desired ending inventory. . . . . 90,000† Total needs . . . . . . . . . . . . .
. . . . . . 330,000 Less beginning inventory . . . . . . . . 60,000 Required
purchases . . . . . . . . . . . . $270,000 *$400,000 sales _ 60% cost ratio _
$240,000. †$360,000 _ 25% _ $90,000. b. Schedule of expected cash disbursements
for merchandise purchases: Jan Feb. March Quarter December purchases . . . . . .
. . . . . $ 93,000 $ 93,000 January purchases . . . . . . . . . . . . . 135,000
135,000 270,000 February purchases . . . . . . . . . . . . — March purchases . .
. . . . . . . . . . . — Total cash disbursements for purchases . . . . . . . . .
. . . . . . $228,000 3. Schedule of expected cash disbursements for selling and
administrative expenses: Jan Feb March Quarter Salaries and wages . . . . . . .
. . . . . . . . . . $ 27,000 Advertising . . . . . . . . . . . . . . . . . . . .
. . . . 70,000 Shipping . . . . . . . . . . . . . . . . . . . . . . . . . .
20,000 Other expenses . . . . . . . . . . . . . . . . . . . . 12,000 Total cash
disbursements for selling and administrative expenses . . . $ 129,000 4. Cash budget: Jan Feb March Quarter Cash balance,
beginning . . . . . . . . $ 48,000 Add cash collections . . . . . . . . . . .
304,000 Total cash available . . . . . . . . . . . . 352,000 Less cash
disbursements: Purchases of inventory . . . . . . . 228,000 Selling and
administrative expenses . . . . . . . . . . . . . . . . 129,000 Purchases of
equipment . . . . . . — Cash dividends . . . . . . . . . . . . . . 45,000 Total
cash disbursements . . . . . . . 402,000 Excess (defi ciency) of cash . . . . .
. (50,000) Financing: Etc. 5. Prepare an absorption costing income statement for
the quarter ending March 31 as shown in Schedule 9 in the chapter. 6. Prepare a
balance sheet as of March 31
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:
Debits Credits Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 48,000
Accounts receivable . . . . . . . . . . . . 224,000 Inventory . . . . . . . . .
. . . . . . . . . . . . 60,000 Buildings and equipment (net) . . . . 370,000
Accounts payable . . . . . . . . . . . . . . $ 93,000 Capital stock . . . . . .
. . . . . . . . . . . . 500,000 Retained earnings . . . . . . . . . . . . .
109,000 $702,000 $702,000 b. Actual sales for December and budgeted sales for
the next four months are as follows: December (actual) . . . . . . $280,000
January . . . . . . . . . . . . . . $400,000 February . . . . . . . . . . . . .
$600,000 March. . . . . . . . . . . . . . . . $300,000 April . . . . . . . . . .
. . . . . . . $200,000 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. (In other words, cost of goods sold is 60% of sales.) e. 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 for the quarter. f. Each month’s ending inventory should equal
25% of the following month’s cost of goods sold. g. 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. h. 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. i. During January, the company will declare and pay
$45,000 in cash dividends. j. 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: 1. Schedule of expected cash collections: Jan. Feb March Quarter Cash sales . . . . . . . . . . . . . . . . . . . $
80,000 Credit sales . . . . . . . . . . . . . . . . . 224,000 Total cash
collections . . . . . . . . .. $304,000 2. a. Merchandise purchases budget: Jan.
Feb. March Qt. Budgeted cost of goods sold . . . . . $240,000* $360,000 Add
desired ending inventory. . . . . 90,000† Total needs . . . . . . . . . . . . .
. . . . . . 330,000 Less beginning inventory . . . . . . . . 60,000 Required
purchases . . . . . . . . . . . . $270,000 *$400,000 sales _ 60% cost ratio _
$240,000. †$360,000 _ 25% _ $90,000. b. Schedule of expected cash disbursements
for merchandise purchases: Jan Feb. March Quarter December purchases . . . . . .
. . . . . $ 93,000 $ 93,000 January purchases . . . . . . . . . . . . . 135,000
135,000 270,000 February purchases . . . . . . . . . . . . — March purchases . .
. . . . . . . . . . . — Total cash disbursements for purchases . . . . . . . . .
. . . . . . $228,000 3. Schedule of expected cash disbursements for selling and
administrative expenses: Jan Feb March Quarter Salaries and wages . . . . . . .
. . . . . . . . . . $ 27,000 Advertising . . . . . . . . . . . . . . . . . . . .
. . . . 70,000 Shipping . . . . . . . . . . . . . . . . . . . . . . . . . .
20,000 Other expenses . . . . . . . . . . . . . . . . . . . . 12,000 Total cash
disbursements for selling and administrative expenses . . . $ 129,000 4. Cash budget: Jan Feb March Quarter Cash balance,
beginning . . . . . . . . $ 48,000 Add cash collections . . . . . . . . . . .
304,000 Total cash available . . . . . . . . . . . . 352,000 Less cash
disbursements: Purchases of inventory . . . . . . . 228,000 Selling and
administrative expenses . . . . . . . . . . . . . . . . 129,000 Purchases of
equipment . . . . . . — Cash dividends . . . . . . . . . . . . . . 45,000 Total
cash disbursements . . . . . . . 402,000 Excess (defi ciency) of cash . . . . .
. (50,000) Financing: Etc. 5. Prepare an absorption costing income statement for
the quarter ending March 31 as shown in Schedule 9 in the chapter. 6. Prepare a
balance sheet as of March 31
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