Week 4 Homework Assignment Please complete the below problems and s ubmit your a

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Week 4 Homework Assignment

Please complete the below problems and submit your answers in the Week 4 Dropbox. See "Syllabus/Due Dates for Assignments & Exams" for due date information.

Martin & Sons is a small wholesale distributor of consumer goods. The company generates a gross margin of 27% of sales. Sales are 35% for cash and 65% on credit. Credit sales are collected in the month following sale, and accounts receivable on June 30, 2014 are the result of June credit sales. Actual and budgeted sales for the period were as follows:

June (actual)

$45,000

July

$52,000

August

$56,000

September

$60,000

October

$48,000

The company plans for each month's ending inventory to be 28% of the following month's budgeted cost of goods sold. Halfof a month's inventory purchases are paid for in the month of purchase; the other half are paid for in the month followingpurchase. The accounts payable on June 30 are the result of Junepurchases of inventory. All monthly expenses were paid monthly. Monthly expenses included: commissions, $9,000; rent, $1,200; other expenses (excluding depreciation), 5% of sales. Depreciation is $1,300 for the quarter and includes depreciation on new assets acquired during the quarter. The assets acquired for cash during the quarter included equipmentof $2,100 in July and $3,000 in August. The company wishes to maintain a minimum cash balance of $3,000 at the end of each month. The company has a financing facility that allows the company to borrow in increments of $1,000 at the beginning of each month from a local bank, up to a total loan balance of $30,000. The interest rate on these loans is 1.5% per month, and interest is not compounded. The company, when able, repays the loan plus accumulated interest at the end of the quarter.

Additional information:

Current assets as of June 30:

Cash

$4,000

Accounts receivable

$29,250

Inventory

$7,100

Buildings and equipment, net

$102,550

Accounts payable

$22,400

Capital stock

$99,000

Retained earnings

$21,500

Required:

Using the data above, for quarter ending September 2014,prepare the following:

a. The schedule of the expected cash collections

b. The merchandise purchases budget:

c. The schedule of expected cash disbursements – merchandise purchases.

d. schedule of expected cash disbursement –Selling and administrative expenses

e. The cash budget:

f. An absorption costing income statement,

g. A balance sheet as of September 30.

June (actual)

$45,000

July

$52,000

August

$56,000

September

$60,000

October

$48,000

Explanation / Answer

Month Jun Jul Aug Sep Oct Sales          45,000          52,000      56,000      60,000      48,000 COGS @73%          32,850          37,960      40,880      43,800      35,040 Credit sales          29,250          33,800      36,400      39,000      31,200 Cash Collection Schedule Total Cash Sales          15,750          18,200      19,600      21,000      16,800      58,800 Credit Sale of Jun          29,250      29,250 Credit Sale of Jul      33,800      33,800 Credit Sale of Aug      36,400      36,400 Credit Sale of Sep      39,000                -   Total Cash Collection          47,450      53,400      57,400    158,250 Ending Inventory            7,100          11,446      12,264         9,811                -   Merchandise Purchase          42,306      41,698      41,347    125,351 Cash Paymments Jul Aug Sep Merchandise Purchase AP Balance Jun          22,400      22,400 Merchandise Purchase Jul          21,153      21,153      42,306 Merchandise Purchase Aug      20,849      20,849      41,698 Merchandise Purchase Sep      20,674      20,674 Total Merchandise payments          43,553      42,002      41,522                -      127,078 Cash Payments Selling & Admin Expense Cash Paymments Jul Aug Sep Total Commissions            9,000         9,000         9,000      27,000 Rent            1,200         1,200         1,200         3,600 Other expenses            2,600         2,800         3,000         8,400 Total Payments          12,800      13,000      13,200      39,000 Cash budget Jul Aug Sep Total Opening Balance            4,000         3,097         3,095 Cash Receipts          47,450      53,400      57,400    158,250 Cash Payment Merchandise          43,553      42,002      41,522    127,078 Cash Pament Selling & Admin          12,800      13,000      13,200      39,000 Equipment            2,100         3,000 Total Cash Payment          58,453      58,002      54,722    166,078 Cash Bal          (7,003)      (1,505)         5,772 Bank Loan          10,100         4,600      (2,200) Interest Payment            560 Cash Balance            3,097         3,095         3,012 Income statement Jul Aug Sep Total Sales          52,000      56,000      60,000    168,000 COGS          37,960      40,880      43,800    122,640 Gross Profit          14,040      15,120      16,200      45,360 Seeling & Admin expense          12,800      13,000      13,200      39,000 Depreciation         1,300 Interes on loan                152            221            188            560 Net Income         4,501 Balance Sheet As on Sep 30. Current Assets Cash            3,012 Accounts Receivable          39,000 Inventory            9,811 Total Current Assets          51,823 Building & Equipment net       106,350 Total Assets       158,173 Equities & Liab Current Liab Accounts Payable          20,673 Bank Loan Payable          12,500 Total Current Liab          33,173 Capital stock          99,000 Retained Earning          26,001 Total Equity & Liabilities       158,173

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