Question

Problem 8-29 Completing a Master Budget (LO8-2, L08-4, LO8-7, LO8-8, LO8-9, LO8-10] 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 $ 7,400 $ 19,600 $ 39,000 $ 126,000 $ 23, 175 $ 150,000 $ 18,825 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 49,000 $ 65,000 $ 70,000 $ 95,000 $ 46,000

Answer 1

Solution 1:

Schedule of expected cash collections
Particulars	April	May	June	Quarter
Budgeted Sales	$65,000.00	$70,000.00	$95,000.00	$230,000.00
Cash Sale	$39,000.00	$42,000.00	$57,000.00	$138,000.00
Collection for credit sales	$19,600.00	$26,000.00	$28,000.00	$73,600.00
Total Collections	$58,600.00	$68,000.00	$85,000.00	$211,600.00

Solution 2:

Merchandise Purchase Budget
Particulars	April	May	June	Quarter
Budgeted Cost of Goods Sold (75% of Sales)	$48,750.00	$52,500.00	$71,250.00	$172,500.00
Add: Desired ending merchandise inventory (80% of next month COGS)	$42,000.00	$57,000.00	$39,600.00	$39,600.00
Total Needs	$90,750.00	$109,500.00	$110,850.00	$212,100.00
Less: Beginning inventory	$39,000.00	$42,000.00	$57,000.00	$39,000.00
Required purchases	$51,750.00	$67,500.00	$53,850.00	$173,100.00

Schedule of expected cash disbursement - Merchandise Purchases
Particulars	April	May	June	Quarter
March Purchases	$23,175.00			$23,175.00
April Purchases	$25,875.00	$25,875.00		$51,750.00
May Purchases		$33,750.00	$33,750.00	$67,500.00
June Purchases			$26,925.00	$26,925.00
Total Disbursement	$49,050.00	$59,625.00	$60,675.00	$169,350.00

Solution 3:

Cash Budget - Shilow company
Particulars	April	May	June	Quarter
Opening Cash balance	$7,400.00	$4,650.00	$4,225.00	$7,400.00
Add: Collection from customers	$58,600.00	$68,000.00	$85,000.00	$211,600.00
Total Cash Available	$66,000.00	$72,650.00	$89,225.00	$219,000.00
Less - Cash Disbursement:
For Inventory	$49,050.00	$59,625.00	$60,675.00	$169,350.00
For Expenses	$13,900.00	$14,800.00	$19,300.00	$48,000.00
For Equipment	$1,400.00	$0.00	$0.00	$1,400.00
Total Cash disbursement	$64,350.00	$74,425.00	$79,975.00	$218,750.00
Excess (deficiency) of cash available over disbursements	$1,650.00	-$1,775.00	$9,250.00	$250.00
Financing:
Borrowings	$3,000.00	$6,000.00	$0.00	$9,000.00
Repayments	$0.00	$0.00	-$5,000.00	-$5,000.00
Interest	$0.00	$0.00	-$210.00	-$210.00
Total Financing	$3,000.00	$6,000.00	-$5,210.00	$3,790.00
Ending cash balance	$4,650.00	$4,225.00	$4,040.00	$4,040.00

Solution 4:

Absorption costing income statement - Shilow Company
for quarter ended June 30
Particulars	Amount
Sales	$230,000.00
Cost of goods sold (75%)	$172,500.00
Gross profit	$57,500.00
Operating expenses:
Sales commission	$27,600.00
Rent	$6,600.00
Other expenses	$13,800.00
Depreciation	$2,835.00
Total operating expenses	$50,835.00
Operating income	$6,665.00
Interest expense	$210.00
Net Income	$6,455.00

Solution 5:

Balance Sheet- Shilow Company
30-Jun
Particulars	Amount
Assets:
Cash	$4,040.00
Accounts receivables ($95,000*40%)	$38,000.00
Inventory	$39,600.00
Building and equipment, net ($126,000 +$1,400 - $2,835)	$124,565.00
Total Assets	$206,205.00
Liabilities and stockholder's Equity:
Accounts payable (53,850*50%)	$26,925.00
Borrowings	$4,000.00
Common Stock	$150,000.00
Retained Earnings ($18,825 + $6,455)	$25,280.00
Total liabilities and stockholders equity	$206,205.00