Question

Create a budgeted income statement for the three-month period ending June 30 using the contribution approach.

ACC 2100 F19 Budget Project i) Save & Exit Saved Help Submit 1 The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31 9,100 26,400 49,200 106,800 29,550 150,000 11,950 Cash Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Print Retained earnings a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May $ 66,000 $ 82,000 87,000 112,000 $ 63,000 June July 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, $3,900 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $801 per month (includes depreciation on new assets) g. Equipment costing $3,100 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: Mc Graw Hill 1 of 1 Score anster>

Answer 1

Answer to Part 1. June Cash Sales Collection from Credit Sales Total Cash Collections Schedule of Expected Cash Collections April May 49200 52200 26400 32800 75600 85000 67200 34800 102000 Quarter 168600 94000 262600 Answer to Part 2. June Budgeted Cost of goods sold Add: Desired Ending Inventory Total Needs Less: Beginning Inventory Required Purchases Merchandise Purchases Budget April May 61500 65250 52200 67200 113 700 132450 49200 52200 64500 80250 84000 37800 121800 67200 54600 Quarter 210750 37800 248550 49200 199350 Schedule of Expected Cash Disbursements - Merchandise Purchases April May June March Purchases 29550 April Purchases 32250 32250 May Purchases 40125 40125 June Purchases 27300 Total Disbursements 61800 72375 67425 Quarter 29550 64500 80250 27300 201600 Cash Disbursements for Expenses April May Commission 9840 10440 3900 3900 Other Expenses 4920 5220 Total Cash Disbursements for Expenses 18660 19560 Rent June 13440 3900 6720 24060 Quarter 33720 11 700 16860 62280

April 9100 75600 84700 May 4140 85000 89140 June 4205 102000 106205 Quarter 9100 262600 271700 72375 67425 Answer to Part 3. Cash Budget Beginning Cash Balance Add: Cash Collections Total Cash Available Less: Cash Disbursements For Inventory For Equipment For Expenses Total Cash Disbursements Excess (Deficiency) of Cash Financing: Borrowings Repayments Interest Total Financing Ending Cash Balance 61800 3100 18660 83560 1140 19560 91935 -2795 24060 91485 14720 201600 3100 62280 266980 4720 3000 7000 -10000 -230 -10230 4490 10000 -10000 -230 -230 4490 3000 4140 7000 4205

281000 Answer to Part 4 Shilow Company Income Statement For the Quarter Ended June 30 Sales Cost of Goods sold Beginning Inventory 49200 Purchases 199350 Goods available for Sale 248550 Ending Inventory 37800 Cost of Goods sold Gross Profit Selling and Administrative Expenses: Commission 33720 Rent 11700 Other Expenses 16860 Depreciation 2403 Total Selling and Adminitrative Expenses Net Operating Income Interest Expense Net Income 210750 70250 64683 5567 230 5337

Answer to Part 5. Shilow Company Balance Sheet June 30 Assets Current Asstes: Cash 4490 Accounts Receivable 44800 Inventory 37800 Total Current Assets Building and Equipment, net Total Assets Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable Stockholders' Equity: Common Stock 150000 Retained Earnings 17287 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 87090 107497 194587 27300 167287 194587