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Hillyard Company prepares its master budget on a quarterly basis.

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Question;PROBLEM #5;Hillyard Company 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 of 2014;a. As of December 31, 2013, the company?s;balance sheet showed the following account balances;Cash $ 48,000 Accounts Payable $ 93,000;Accounts;Receivable 156,800 Capital Stock;400,000;Less: Allowance for bad debt (4,480) $152,320;Retained Earnings 137,320 Inventory 60,000;Plant;Equipment (net) 370,000;$630,320 $630,320;======= =======;b. Actual sales for December and budgeted sales;for the next four months are as follows;Dec.-$280,000 Jan.-$400,000 Feb.-$600,000 Mar.-$300,000 Apr.-$200,000;c. Sales are 20 percent for cash and 80 percent;on credit. The collection pattern for;credit sales, which is not expected to change over the next six months, is 30;percent in the month of sale, 68 percent one month after the month of sale, and;2 percent uncollectible.;d. The monthly;gross profit rate is 40 percent of sales.;e. Monthly expenses are budgeted as;follows: salaries and wages, $27,000 per;month, advertising, $50,000 per month plus 4 percent of previous month?s sales;and other expenses, 3% of sales. These expenses are paid for in the month in;which they are incurred. Depreciation;expense is $14,000 per month.;f. At the end of each month, inventory is to be;on hand equal to 25 percent 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 is paid for in the following month.;h. During January, the company will purchase a;new copy machine for $1,700 cash. During February, other equipment will be;purchased for $80,000 (25% cash down payment with the remaining balance to be;paid in four equal installments beginning one month after the date of;purchase).;i. During January, the company will declare and;pay $45,000 in cash dividends.;A. Prepare a well labeled Schedule of;Expected Cash Collections (not an entire cash budget) for each month (January;February, and March) of the first quarter of 2014.;B. Prepare a well labeled Inventory;Purchases Budget (in $) for each month (January, February, and March) of the;first quarter of 2014.;C. Prepare a well labeled Schedule of;Cash Disbursements (not an entire cash budget) for each month (January;February, and March) of the first quarter of 2014.;D. Assume that at the end of January, 2014;Hillyard Company?s Cash Budget indicates a negative cash balance. Other than;borrowing money, list at least three distinctly different recommendations for;alleviating this expected negative cash balance.

 

Paper#50610 | Written in 18-Jul-2015

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