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:

  Cash	$	41,000
  Accounts receivable		200,800
  Inventory		57,900
  Buildings and equipment (net)		351,000
  Accounts payable			$	85,425
  Common stock				500,000
  Retained earnings				65,275
$	650,700     	$	650,700
b.	Actual sales for December and budgeted sales for the next four months are as follows:
  December(actual)	$251,000
  January	$386,000
  February	$583,000
  March	$297,000
  April	$194,000
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, $16,000 per month: advertising, $56,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,260 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 $1,100 cash. During March, other equipment will be purchased for cash at a cost of $70,500.

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:
3.
Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

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Sale
Jan	Feb	March
cash sales 20%		77200	116600	59400
credit sale 80%		308800	466400	237600
total sales		386000	583000	297000
Cash collection
Jan	Feb	March	total
december account receivable	200800			200800
cash sale			77,200	116,600	59,400	253,200
Cash collected from credit sale		308,800	466,400	775200
total cash collection		278000	425400	525800	1229200
purchase required
Jan	Feb	March	total		april
cost of goods sold 60% of sales	231600	349800	178200	759600		116400
Add ending inventory	87450	44550	29100	29,100
total needs		319050	394350	207300	788700
less opening inventory	-57900	-87,450	-44,550	-57,900
production required		261150	306900	162750	730800
Cash paid for purchases
Jan	Feb	March	total
accounts payable		85,425			85,425
jan 261,150/2		130575	130,575		261150
Feb 306,900/2			153450	153,450	306900
March 162,750/2				81375	81375
total cash paid		216,000	284025	234825	734,850
Cash budget
Jan	Feb	March	total
opening cash balance	41,000	30,120	51,755	41,000
cash received from customers	278,000	425,400	525,800	1,229,200
total receipts		319,000	455520	577555	1,270,200
Cash disbursement
cash paid for purchases	216,000	284,025	234,825	734,850
Salaries & wages		16,000	16,000	16,000	48,000
advertising		56,000	56,000	56,000	168,000
shipping 5% of sale		19300	29150	14850	63300
other expense 3% of sale	11580	17490	8910	37,980
equipment purchase			1,100	70,500	71,600
Cash dividend		45,000			45,000
total cash disbursements	363,880	403,765	401,085	1,168,730
Excess(Deficiency)		-44880	51755	176,470	101,470
Financing
Borrowing		75,000	0		75,000
repayment		0	0	-75,000	-75,000
interest			0	0	-2250	-2250
total financing		0	0	-77250	-2,250
cash balance		30120	51,755	99,220	99220
interest 75,000*1%*3 =	2250