how me your Works!!! Problem 7-27A Completing a Master Budget [LO7-2, LO7-4, LO7
ID: 2460006 • Letter: H
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how me your Works!!!
Problem 7-27A Completing a Master Budget [LO7-2, LO7-4, LO7-7, LO7-8, LO7-9, LO7-10]
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.
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.
Monthly expenses are as follows: commissions, 12% of sales; rent, $3,000 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $963 per month (includes depreciation on new assets).
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 $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
3. Complete the following cash budget: (Borrow and repay in increments of $1,000. Cash deficiency, repayments and interest should be indicated by a minus sign.)
4. Prepare an absorption costing income statement for the quarter ended June 30.
5. prepare a balance sheet as of June 30.
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:Explanation / Answer
Answer:
Schedule From collection of sales Particulars April May June Total Sales 73000 78000 103000 254000 Cash Sales (60%) 43800 46800 61800 152400 40% credit sales 22800 29200 31200 83200 Total cash collection 66600 76000 93000 235600 Purchase budget Particulars April May June Total Budgeted COGS 54750 58500 77250 190500 Add: Ending inventory 46800 61800 32400 141000 Less: Beg inventory 43800 46800 61800 152400 Purchase 57750 73500 47850 179100 Schedule of expected cash disbursement for inventory Particulars April May June Total 50% are paid in month of purchase 28875 36750 23925 89550 50% are paid in following month 26175 28875 36750 91800 Total cash payment 55050 65625 60675 181350 Schedule of payment of expenses Particulars April May June Total Commission on sales 8760 9360 12360 30480 Rent 3000 3000 3000 9000 Other exp 4380 4680 6180 15240 Total payment 16140 17040 21540 54720Related Questions
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