Question

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings $ 7,600 $ 20,400 $ 40,200 $ 128,400 $ 23,925 $ 150,000 $ 22,675 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 51,000 $ 67,000 $ 72,000 $ 97,000 $ 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.

Answer 1

Calculation April April May June May 72,000 June 97,000 Quarter 236,000 67,000 Shilow Company Schedule of expected cash collections Req1 Sales Cash collections Cash sales Credit sales Total collections =67,000*60% 40,200 20,400 60,600 43,200 26,800 70,000 58,200 28,800 87,000 141,600 76,000 217,600 =72,000*60% =67,000*40% =97,000*60% =72,000*40% Inventory Purchase budget Req 2a Budgeted Cost of goods sold Add Desired Ending Inventory Total Needs Less Beginning Inventory Required Purchases April =67,000*75% =54,000*80% May =72,000*75% =72,750*80% June =97,000*75% -48,000*75%*80% April 50,250 43,200 93,450 40,200 53,250 54,000 58,200 112,200 43,200 69,000 72,750 28,800 101,550 58,200 43,350 Quarter 177,000 28,800 205,800 40,200 165,600 From Balance Sheet End Inv of April End Inv of May June April May June Schedule of expected cash discursements-Purchases Req 2b April May Mar Purchases 23,925 April Purchases 26,625 26,625 May Purchases 34,500 June Purchases Total disbursements for purchases 50,550 61,125 =53,250/2 Quarter 23,925 53,250 69,000 21,675 167,850 =53,250/2 =69,000/2 34,500 21,675 56,175 =69,000/2 -43,350/2 April May June April 7,600 60,600 68,200 May 4,590 70,000 74,590 June 4,105 87,000 91,105 Quarter 7,600 217,600 225,200 61,125 15,360 56,175 19,860 =(67,000*(12% +6%)) +2,400 =172,000*(12%+6%))+2,400 =(97,000*(12%+6%))+2,400 Cash budget Req3 Cash balance, beginning Add Cash collections Total cash available Less cash disbursements For Inventory For expenses For equipment Total Cash disbursements Excess (deficiency) of cash Financing Borrowings Repayments Interest Total financing Cash balance, ending 50,550 14,460 1,600 66,610 1,590 167,850 49,680 1,600 219,130 6,070 76,485 (1,895) 76,035 15,070 3,000 6,000 =4,000-1,000 -4,000+2,000 9,000 (9,000) (210) (210) 5,860 (9,000) (210) (9,210) 5,860 =(3,000*1%*3)+6,000*1%*2) 3,000 4,590 6,000 4,105

236,000 From Balance Sheet From Purchase Budget 40,200 165,600 205,800 (28,800) From Purchase Budget Income Statement Req4 Sales Cost of goods sold Beginning Inventory Add Purchases Goods Available For Sale Ending Inventory Gross Margin Selling & Admin Expenses Commissions Rent Depreciation Other expenses Net Operating Income Interest expense Net Income 177,000 59,000 28,320 7,200 2,889 14,160 = 236,000*12% =2,400*3 =963*3 =236,000*6% 52,569 6,431 210 6,221 From Cash Budget Balance Sheet Req5 Assets Current Assets Cash Accounts Receivable Inventory Total Current Assets Fixed Assets Building & Equipment Total Assets 5,860 38,800 28,800 =97,000*40% 73,460 =128,400+1,600-963*3 127,111 200,571 21,675 =43,350/2 21,675 Liabilities & Stockholders Equity Liabilities Accounts Payable Total Liabilities Stockholders Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 150,000 28,896 =22,675+6,221 178,896 200,571