Question

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings $ 8,400 $ 23,600 $ 45,000 $ 123,600 $ 26,925 $ 150,000 $ 23,675 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) Apr 11 May June July $ 59,000 $ 75,000 $ 80.000 $ 105,000 $ 56,000 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

Answer 1

Answer to Part 1. Cash Sales Collection from Credit Sales Total Cash Collections Schedule of Expected Cash Collections April May 45000 48000 23600 30000 | 68600 78000 June 63000 32000 95000 Quarter 156000 85600 2 41600 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 56250 60000 48000 63000 104250 123000 45000 48000 59250 75000 June 78750 33600 112350 63000 49350 Quarter 195000 33600 228600 45000 183600 Schedule of Expected Cash Disbursements - Merchandise Purchases April May June March Purchases 26925 April Purchases 29625 29625 May Purchases 37500 37500 June Purchases 24675 Total Disbursements 56550 67125 62175 Quarter 26925 59250 75000 24675 185850 June 12600 Cash Disbursements for Expenses April May Commission 9000 9600 Rent 3200 3200 Other Expenses 4500 4800 Total Cash Disbursements for Expenses 16700 17600 3200 6300 Quarter 31200 9600 15600 56400 22100

April 8400 68600 77000 May 4350 78000 82350 June 4625 95000 99625 Quarter 8400 241600 250000 56550 67125 62175 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 2400 16700 75650 1350 17600 84725 -2375 22100 84275 15350 185850 2400 56400 244650 5350 3000 7000 -10000 -230 -10230 5120 0 7000 4625 10000 -10000 -230 -230 5120 3000 4350

260000 Answer to Part 4 Shilow Company Income Statement For the Quarter Ended June 30 Sales Cost of Goods sold Beginning Inventory 45000 Purchases 183600 Goods available for Sale 228600 Ending Inventory 33600 Cost of Goods sold Gross Profit Selling and Administrative Expenses: Commission 31200 Rent 9600 Other Expenses 15600 Depreciation 2781 Total Selling and Adminitrative Expenses Net Operating Income Interest Expense Net Income 195000 65000 59181 5819 230 5589

Answer to Part 5. Shilow Company Balance Sheet June 30 Assets Current Asstes: Cash 5120 Accounts Receivable 42000 Inventory 33600 Total Current Assets Building and Equipment, net Total Assets Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable Stockholders' Equity: Common Stock 150000 Retained Earnings 29264 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 80 720 123 219 203939 24675 179264 203939