Question

The following its relate to the operations of Shflow Company, wholesale butor of consumer goods Current assets as of March 31: $ 7.4 Accounts receivable $ 19,629 Inventory $ 39, Bee Building and equipment, net $126, eee Accounts payable $ 23,175 Common stock $15e, Bee Retained earnings $ 18,825 The gross margins 25% of sales b. Actual and budgeted sales ist March (actual) April $ 49, Bea $ 65, Bea $70, Bea $ 95, Bee $ 46, Bea June July Sales are 60% for cash and 40% on Credit Credit sales are collected in the month following sale. The accounts receivable st March 31 are result of March creat sales d. Each month's ending inventory should equal 90% of the following month's budgeted cost of goods sold. e. One-harof a month's Inventory purchases is paid for in the month of purchase, the other half paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory. Monthly expenses are as follows: commissions. 12% of sales.rent $2.200 per month; other expenses (excluding depreciation, 6% of sales. Assume that these expenses are paid monthly. Depreciation is $945 per month includes depreciation on new assets) 9. Equipment costing $1,400 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 $1000 at the beginning of each month, up to total loan balance of $20,000. The Interest rate on these loans 1% per month and for simplicity we will assume that interests 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. Recured Required2 Raquired 3 Required 4 Required Complete the schedule of expected cash corections Quarter Bohedule of Expected Cash Collections April May June S 000 TO Cash Required 2 >

Answer 1

Answer to Part 1. Cash Sales Collection from Credit Sales Total Cash Collections Schedule of Expected Cash Collections April May 39000 42000 19600 26000 58600 68000 June 57000 28000 85000 Quarter 138000 73600 211600 Answer to Part 2. Budgeted Cost of goods sold Add: Desired Ending Inventory Total Needs Less: Beginning Inventory Required Purchases Merchandise Purchases Budget April May 48750 52500 42000 57000 90750 109500 39000 42000 51750 67500 June 71250 27600 98850 57000 41850 Quarter 172500 27600 200100 39000 161100 Schedule of Expected Cash Disbursements - Merchandise Purchases April May June March Purchases 23175 April Purchases 25875 25875 May Purchases 33750 33750 June Purchases 20925 Total Disbursements 49050 59625 54675 Quarter 23175 51750 67500 20925 163350 Cash Disbursements for Expenses April May Commission 7800 8400 Rent 2200 2200 Other Expenses 3900 4200 Total Cash Disbursements for Expenses 13900 14800 June 11400 2200 5700 19300 Quarter 27600 6600 13800 48000

Quarter 7400 April 7400 58600 66000 May 4650 68000 72650 June 4225 85000 89225 211600 219000 59625 54675 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 49050 1400 13900 64350 1650 14800 74425 -1775 19300 73975 15250 163350 1400 48000 212750 6250 3000 6000 -9000 -210 -9210 6040 9000 -9000 -210 -210 6040 3000 4650 6000 4225

230000 Answer to Part 4 Shilow Company Income Statement For the Quarter Ended June 30 Sales Cost of Goods sold Beginning Inventory 39000 Purchases 161100 Goods available for Sale 200100 Ending Inventory 27600 Cost of Goods sold Gross Profit Selling and Administrative Expenses: Commission 27600 Rent 6600 Other Expenses 13800 Depreciation 2835 Total Selling and Adminitrative Expenses Net Operating Income Interest Expense Net Income 172500 57500 50835 6665 210 6455

38000 Answer to Part 5. Shilow Company Balance Sheet June 30 Assets Current Asstes: Cash 6040 Accounts Receivable Inventory 27600 Total Current Assets Building and Equipment, net Total Assets Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable Stockholders' Equity: Common Stock 150000 Retained Earnings 25280 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 71640 124565 196205 20925 175 280 196205