hillyard_master-budget1
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| 1 | 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: | |||||||||
| 2 | As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account Balances | |||||||||
| Debits | Credits | |||||||||
| Cash | 48000 | |||||||||
| Account Receivable | 224000 | |||||||||
| Inventory | 60000 | |||||||||
| Building and Equipment | 370000 | |||||||||
| Account Payable | 93000 | |||||||||
| Capital Stock | 500000 | |||||||||
| Retained Earnings | 109000 | |||||||||
| Totals | $ | 702000 | 702000 | |||||||
| 3 | Actual sales for December and budgeted sales for the next four months are as follows: | |||||||||
| Dec-10 | $280,000 | |||||||||
| Jan-11 | 400000 | |||||||||
| Feb-11 | 600000 | |||||||||
| Mar-11 | 300000 | |||||||||
| Apr-11 | 200000 | |||||||||
| 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 for the quarter. | ||||||||||
| 6 | Each month’s ending inventory should equal 25% of the following month’s cost of goods sold. | |||||||||
| 7 | 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. | ||||||||||
| 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 at the beginning of each | ||||||||||
| month. The interest rate on these loans is 12% 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. | ||||||||||
12 years ago
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hillyard_master-budget11.xls
