ACC PROBLEM #5 Hillyard Company

PROBLEM #5Hillyard Company prepares its master budget on a quarterly basis. The following datahave been assembled to assist in preparation of the master budget for the first quarter of 2014:a. As of December 31, 2013, the companys balance sheet showed the following accountbalances:Cash$ 48,000Accounts PayableAccounts Receivable156,800Capital StockLess: Allowance for bad debt (4,480) $152,320 Retained Earnings60,000Plant & Equipment (net)370,000$ 93,000400,000137,320 Inventory______$630,320$630,320==============b. Actual sales for December and budgeted sales for the next four months are as follows:Dec.-$280,000Jan.-$400,000Feb.-$600,000Mar.-$300,000Apr.-$200,000c. 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, 68percent 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 months sales; and other expenses, 3%of sales. These expenses are paid for in the month in which they are incurred. Depreciationexpense is $14,000 per month.f. At the end of each month, inventory is to be on hand equal to 25 percent of the followingmonths sales needs stated at cost.g. One half of a months inventory purchases are paid for in the month of purchase; the other halfis paid for in the following month.h. During January, the company will purchase a new copy machine for $1,700 cash. DuringFebruary, other equipment will be purchased for $80,000 (25% cash down payment with theremaining balance to be paid in four equal installments beginning one month after the date ofpurchase).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) foreach 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 eachmonth (January, February, and March) of the first quarter of 2014.D. Assume that at the end of January, 2014, Hillyard Companys Cash Budget indicates anegative cash balance. Other than borrowing money, list at least three distinctly differentrecommendations for alleviating this expected negative cash balance.