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 Building and equipeent, net Accounts payable Common stock Retained earnings $ 26,408 $49,20e $ 106,880 29,558 $150,000 a. The gross margin is 25% of sales. b. Actual and budgeted sales data March (actual) April $82,a0e $87,8ee une uly Sales are 60% for cash and 40% on credit Credit sales are collected in the month following sale. The accounts recevable 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 f, Monthly expenses are as follows: commissions. 12% of sales, rent, $3,900 per montre other expenses (excluding depreciation. g. Equipment costing $3300 will be purchased for cosh in Apri accounts payable at March 31 are the result of March purchases of inventory of sales, Assume that these expenses are paid monthly. Depreciarion is $801 per month ancludes depreciation on new assets) 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 S20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not accumulated interest at the end of the quarter Required: Using the preceding data

Answer 1