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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 Accounts receivable Inventory Buildings and equipment (net) Accounts payable Common stock Retained earnings $ 48,000 206,400 58,950 358,000 $ 87,525 500,000 83,825 $ 671,350 $ 671,350 b. Actual sales for December and budgeted sales for the next four months are as follows: December(actual) January February March April $258,000 $393,000 $590,000 $304,000 $201,000 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, $23,000 per month: advertising, $63,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $43,380 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 $1,800 cash. During March, other equipment will be purchased for cash at a cost of $74,000. . During January, the company will declare and pay $45,000 in cash dividends

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