Hillyard Company — First Quarter Master Budget
Ledger balances as of Dec 31:
AccountDebitCreditCash59,000Accounts receivable215,200Inventory60,600Buildings & equipment (net)369,000Accounts payable90,825Common stock500,000Retained earnings112,975Total703,800703,800
Sales:
Dec (actual): 269,000
Jan: 404,000
Feb: 601,000
Mar: 316,000
Apr: 212,000
Policies & Assumptions:
20% cash, 80% credit; credit collected following month.
Gross margin 40% ? COGS = 60% of sales.
Ending inventory = 25% of next month’s COGS.
Half of inventory purchases paid in month of purchase, half next month.
Monthly expenses: salaries $34,000, advertising $62,000, shipping 5% of sales, other 3% of sales. Depreciation = $45,140/quarter.
Equipment: Feb $2,900, Mar $79,500 (cash).
Dividends: Jan $45,000 (cash).
Maintain minimum cash $30,000; borrow in $1,000 increments; 1% monthly interest; repay principal + interest end of quarter.