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 $ 8,200 $ 22,800 $ 43,800 $ 128,400 $ 26,175 $ 150,000 $ 27,025 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 57,000 $ 73,000 $ 78,000 $ 103,000 $ 54,000

Answer 1

solution: Sales budget Total Sales March April May June | 57000 73000 78000 July 103,000 54000 1.Schedule of Expected Cash Collections cash sales (60% of total sales) credit sales (40% of previous month sales) Total collection April May June 43800 46800 61800 | 22800 29200 31200 66600 76000 93000 Quarter - Total 152400 83200 235600 Quarter 2a. Purchase budget Budgeted Cost of Goods Sold(75% of Sales) Add: Desired Ending Inventory(80% of Next Month's COGS) Total Needs Less: Beginning Inventory Required Inventory Purchase April May June 54750 58500 77250 46800 61800 32400 101550 120300 109650 43800 46800 61800 57750 73500 47850 190500 32400 222900 43800 179100 2b.cash Disbursement for Purchase March Purchase April Purchase (50% of 57750) May Purchase (50% of 73500) June Purchase (50% of 47850) Total cash Disbursement for Purchase April May June Quarter 26175 28875 28875 36750 36750 23925 55050 65625 60675 26175 57750 73500 23925 181350

April May June Quarter 8200 4410 4745 8200 66600 76000 93000 235600 74800 80410 97745 243800 3.Cash budget Beginning Cash Balance Add: Cash Collection Total Cash Available Less: Cash Disbursement For Inventory For expense ** For equipment Total Cash Disbursement Excess/Deficiency) Financing: Borrowing Repayments Interest(3000*0.03+7000*0.02) Total Financing Ending Cash Balance 55050 65625 60675 181350 16140 17040 21540 54720 22000 0 2200 73390 82665 82215 238270 1410 -2255 15530 5530 3000 70000 10000 0 0-10000 -10000 0 -230 -230 3000 70001 -10230 -230 4410| 4745 5300 5300 **Cash Disbursement for selling and administrative Expenses commission (12% of sales) Rent Other Expenses (6% of Sales) Total Cash Disbursement April May June Quarter 8760 9360 12360 30480 3000 3000 3000 9000 4380 4680 6180 15240 16140 17040 21540 54720

254000 4.Income statement sales (73000+78000+103000) cost of goods sold: beginning inventory Purchases goods availalble for sale ending inventory Gross margin selling and administrative expense: commission Rent other expense depreciation (963*3) 43800 179100 222900 32400 190500 63500 5. Balance sheet Current Assets Cash Account Receivable (40%*103000) Inventory Total Current Assets Building and Equipment 128400+2200-2889 Total Assets 5300 41200 32400 78900 127711 206611 30480 9000 15240 2889 23925 Liabilities and Equity Current liabities : Account Payable (50%*47850) Equity: common stock Retained Earnings** net operating income Interest expense net income /(loss) 57609 5891 230 5661 150000 32686 182686 206611 Total Liability and Equity **Retained earning Beginning balance add: Net Income Ending balance 27025 5661 32686