Question

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31 Cash $ 8,000 $ 20,000 36,000 $120,000 21,750 150,000 12,250 Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings a. The gross margin is 25% of sales . b. Actual and budgeted sales data: March (actual) April Мay June July $50,000 60,000 $72,000 90,000 48,000 c. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. d. Each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold. e. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory f. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets) g. Equipment costing $1,500 will be purchased for cash in April. h. Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. 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, up to a total loan balance of $20,000. 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: Using the preceding data: 1. Complete the schedule of expected cash collections 2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases. 3. Complete the cash budget. 4. Prepare an absorption costing income statement for the quarter ended June 30. 5. Prepare a balance sheet as of June 30. Complete this question by entering your answers in the tabs below.

Answer 1

Solutions:

F G H I Particulars Schedule of expected cash collections April May $60,000.00 $72,000.00 June | Quarter $90,000.00 $222,000.00 Budgeted Sales Cash Sale Collection for credit sales $36,000.00 $20,000.00 $43,200.00 $24,000.00 $54,000.00 $133,200.00 $28,800.00 $72,800.00 Total Collections $56,000.00 $67,200.00 $82,800.00 $206,000.00 June Quarter $67,500.00 $166,500.00 Merchandise Purchase Budget Particulars April May Budgeted Cost of Goods Sold (75% of Sales) $45,000.00 $54,000.00 Add: Desired ending merchandise inventory (80% of next month COGS) $43,200.00 $54,000.00 Total Needs $88,200.00 $108,000.00 Less: Beginning inventory $36,000.00 $43,200.00 $28,800.00 $28,800.00 $96,300.00 $195,300.00 $54,000.00 $36,000.00 Required purchases $52,200.00 $64,800.00 $42,300.00 $159,300.00 March Purchases April Purchases May Purchases June Purchases Schedule of expected cash disbursement - Merchandise Purchases Particulars April May June $21,750.00 $26,100.00 $26,100.00 $32,400.00 $32,400.00 $21,150.00 Quarter $21,750.00 $52,200.00 $64,800.00 $21,150.00 Total Disbursement $47,850.00 $58,500.00 $53,550.00 $159,900.00 34 Cash Budget - Shilow company April May $8,000.00 $4,000.00 $56,000.00 $67,200.00 $64,000.00 $71,200.00 June Quarter $4,000.00 $8,000.00 $82,800.00 $206,000.00 $86,800.00 $214,000.00 Particulars Opening Cash balance Add: Collection from customers Total Cash Available Less - Cash Disbursement: For Inventory For Expenses For Equipment Total Cash disbursement $47,850.00 $13,300.00 $1,500.00 $62,650.00 $58,500.00 $15,460.00 $0.00 $73,960.00 $53,550.00 $159,900.00 $18,700.00 $47,460.00 $0.00 $1,500.00 $72,250.00 $208,860.00 $1,350.00 $2,760.00 $14,550.00 $5,140.00 Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total Financing Ending cash balance $2,650.00 $0.00 $0.00 $2,650.00 $4,000.00 $6,760.00 $0.00 $0.00 $6,760.00 $4,000.00 $0.00 $9,410.00 $214.70 $9,624.70 $4,925.30 $9,410.00 $9,410.00 $214.70 $214.70 $4,925.30 Salaries and wages Rent Other expenses Schedule of expected cash disbursement of operating expenses Particulars April May June Quarter $7,200.00 $8,640.00 $10,800.00 $26,640.00 $2,500.00 $2,500.00 $2,500.00 $7,500.00 $3,600.00 $4,320.00 $5,400.00 $13,320.00 Total Disbursement $13,300.00 $15,460.00 $18,700.00 $47,460.00 eet43 Sheet107 (60) ) Sheet49 Sheet156 (58) Sheet540 III 0 <

M NO 34 35 38 Absorption costing income statement - Shilow Company for quarter ended June 30 Particulars Amount Sales $222,000.00 Cost of goods sold (75%) $ 166,500.00 Gross profit $55,500.00 Operating expenses: Sales commission $26,640.00 Rent $7,500.00 Other expenses $13,320.00 Depreciation (900*3) $2,700.00 42 Total operating expenses Operating income Interest expense $50,160.00 $5,340.00 $214.70 Net Income $5,125.30 50 51 52 Amount Balance Sheet- Shilow Company 30-Jun Particulars Assets: Cash Accounts receivables ($90,000*40%) Inventory Building and equipment, net ($120,000 +$ 1500 - $2700) Total Assets $4,925.30 $36,000.00 $28,800.00 $118,800.00 $188,525.30 62 Liabilities and stockholder's Equity: Accounts payable (42300*50%) Common Stock Retained Earnings ($12250 + $5125.30) Total liabilities and stockholders equity $21,150.00 $ 150,000.00 $17,375.30 $188,525.30 69 70 71 eet43 Sheet107 (60) ) Sheet49 Sheet156 (58) Sheet540