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Problem 8-31

The document presents the cash budget and related financial statements for Hillyard Company for the quarter ended March 31. It includes schedules of expected cash collections and purchases. The cash budget tracks sources and uses of cash and calculates the ending cash balance. The income statement shows net income of $80,600 for the quarter. The balance sheet lists assets of $727,100 including cash of $42,900 and stockholders' equity of $644,600 as of March 31.

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Majde Qasem
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166 views4 pages

Problem 8-31

The document presents the cash budget and related financial statements for Hillyard Company for the quarter ended March 31. It includes schedules of expected cash collections and purchases. The cash budget tracks sources and uses of cash and calculates the ending cash balance. The income statement shows net income of $80,600 for the quarter. The balance sheet lists assets of $727,100 including cash of $42,900 and stockholders' equity of $644,600 as of March 31.

Uploaded by

Majde Qasem
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Majde Qasem (120192712) Problem 8-31

1. Schedule of expected cash collections:


January February March Quarter
Cash sales .................... $ 80,000 $120,000 $ 60,000 $ 260,000
Credit sales ................... 224,000 320,000 480,000 1,024,000
Total cash collections ..... $304,000 $440,000 $540,000 $1,284,000

2. a. Merchandise purchases budget:


January February March Quarter
Budgeted cost of goods
sold* ........................... $240,000 $360,000 $180,000 $780,000
Add desired ending
merchandise
inventory** .................. 90,000 45,000 30,000 30,000
Total needs ................. 330,000 405,000 210,000 810,000
Less beginning
merchandise
inventory .................... 60,000 90,000 45,000 60,000
Required purchases ........ $270,000 $315,000 $165,000 $750,000
*
For January sales: $400,000 × 60% cost ratio = $240,000.
**
At January 31: $360,000 × 25% = $90,000. At March 31:
$200,000 April sales × 60% cost ratio × 25% = $30,000.

b. Schedule of expected cash disbursements for merchandise


purchases:

January February March Quarter


December
purchases ............. $ 93,000 $ 93,000 *
January purchases ... 135,000 $135,000 270,000 *
February purchases.. 157,500 $157,500 315,000
March purchases...... 82,500 82,500
Total cash
disbursements for
purchases ............. $228,000 $292,500 $240,000 $760,500
Majde Qasem (120192712) Problem 8-31

3. Cash budget:
January February March Quarter
Beginning cash balance ..... $ 48,000 $ 30,000 $ 30,800 $ 48,000
Add collections from
customers ...................... 304,000 440,000 540,000 1,284,000
Total cash available............ 352,000 470,000 570,800 1,332,000
Less cash disbursements:
Inventory purchases........ 228,000 292,500 240,000 760,500
Selling and administrative
expenses ..................... 129,000 145,000 121,000 395,000
Equipment purchases ...... 0 1,700 84,500 86,200
Cash dividends ............... 45,000 0 0 45,000
Total cash disbursements ... 402,000 439,200 445,500 1,286,700
Excess (deficiency) of cash
available over
disbursements ................ (50,000) 30,800 125,300 45,300
Financing:
Borrowings ..................... 80,000 0 0 80,000
Repayments ................... 0 0 (80,000) (80,000)
Interest
($80,000 × 1% × 3) .... 0 0 (2,400) (2,400)
Total financing................... 80,000 0 (82,400) (2,400)
Ending cash balance .......... $ 30,000 $ 30,800 $ 42,900 $ 42,900
Majde Qasem (120192712) Problem 8-31

4. Income statement:
Hillyard Company
Income Statement
For the Quarter Ended March 31
Sales .......................................................... $1,300,000
Cost of goods sold:
Beginning inventory (Given) ...................... $ 60,000
Add purchases (Part 2) ............................. 750,000
Goods available for sale ............................ 810,000
Ending inventory (Part 2) .......................... 30,000 780,000 *
Gross margin .............................................. 520,000
Selling and administrative expenses:
Salaries and wages ($27,000 × 3) ............. 81,000
Advertising ($70,000 × 3)) ........................ 210,000
Shipping (5% of sales) .............................. 65,000
Depreciation (given) ................................. 42,000
Other expenses (3% of sales) ................... 39,000 437,000
Net operating income .................................. 83,000
Interest expense (Part 4) ............................. 2,400
Net income ................................................. $ 80,600
* A simpler computation would be: $1,300,000 x 60% =
$780,000.
Majde Qasem (120192712) Problem 8-31

5. Balance sheet:
Hillyard Company
Balance Sheet
March 31

Assets
Current assets:
Cash (Part 4) ............................................................... $ 42,900
Accounts receivable (80% × $300,000) ........................ 240,000
Inventory (Part 2) ........................................................ 30,000
Total current assets ........................................................ 312,900
Buildings and equipment, net
($370,000 + $86,200 – $42,000).................................. 414,200
Total assets.................................................................... $727,100

Liabilities and Stockholders’ Equity


Current liabilities:
Accounts payable (Part 2: 50% × $165,000) .. $ 82,500
Stockholders’ equity:
Common stock ............................................. $500,000
Retained earnings* ....................................... 144,600 644,600
Total liabilities and stockholders’ equity............. $727,100

* Beginning retained earnings .................. $109,000


Add net income .................................... 80,600
Total .................................................... 189,600
Deduct cash dividends .......................... 45,000
Ending retained earnings....................... $144,600

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