Question

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 311 Cash Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings 8,300 $ 23,200 $ 44,400 $ 126,000 $ 26,550 $ 150,000 $ 25,350 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 58,000 $ 74,000 $ 79,000 $ 104,000 $ 55,000 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. f. Monthly expenses are as follows: commissions, 12% of sales; rent, $3,100 per month; other expenses (excluding depreciation), 6% of

Answer 1

Answer to Part 1. June Cash Sales Collection from Credit Sales Total Cash Collections Schedule of Expected Cash Collections April May 44400 47400 23200 29600 67600 77000 62400 31600 94000 Quarter 154200 84400 238600 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 55500 59 250 47400 62400 102900 121650 44400 47400 58500 74250 June 78000 33000 111000 62400 48600 Quarter 192750 33000 225750 44400 181350 Schedule of Expected Cash Disbursements - Merchandise Purchases April May June March Purchases 26550 April Purchases 29250 29250 May Purchases 37125 37125 June Purchases 24300 Total Disbursements 55800 66375 61425 Quarter 26550 58500 74250 24300 183600 Quarter 30840 Cash Disbursements for Expenses April May Commission 8880 9480 Rent 3100 3100 Other Expenses 4440 4740 Total Cash Disbursements for Expenses 16420 17320 June 12480 3100 6240 21820 9 300 15420 55560

June April 8300 67600 75900 May 4380 77000 81380 4685 94000 98685 Quarter 8300 238600 246900 55800 66375 61425 0 2300 0 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 16420 74520 17320 83695 -2315 21820 83245 15440 183600 2300 55560 241460 5440 1380 0 3000 0 0 7000 0 0 -10000 -230 10000 -10000 -230 -230 5210 3000 7000 4685 -10230 5210 4380

257000 Answer to Part 4. Shilow Company Income Statement For the Quarter Ended June 30 Sales Cost of Goods sold Beginning Inventory 44400 Purchases 181350 Goods available for Sale 225750 Ending Inventory 33000 cost of Goods sold Gross Profit Selling and Administrative Expenses: Commission 30840 Rent 9300 Other Expenses 15420 Depreciation 2835 Total Selling and Adminitrative Expenses Net Operating Income Interest Expense Net Income 192750 64250 58395 5855 230 5625

Answer to Part 5. Shilow Company Balance Sheet June 30 Assets Current Asstes: Cash 5210 Accounts Receivable 41600 Inventory 33000 Total Current Assets Building and Equipment, net Total Assets Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable Stockholders' Equity: Common Stock 150000 Retained Earnings 30975 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 79810 125465 205275 24300 180975 205275