Problem 9-27 Completing a Master Budget p09-2. L094, LO97, LO9-8, LO9-9, LO9-101

Question

Problem 9-27 Completing a Master Budget p09-2. L094, LO97, LO9-8, LO9-9, LO9-101 The following dats relate to the operations of Shlow Compsny, a wholesale distributor of consumer goods S 8,400 3,800 45,000 123,600 26,925 150,000 23,875 eventony Bulding and equipment, net Capital stock Retained eamings a.The gross margin is 25% of sales. b. Actual and budgeted sales data March Apr May 69,000 76,000 $ 80.000 105,000 56,000 July The acoures recette at Mare, 31 are a resa, asare, eredelt eSales are 60% for cash and 40% on crea credit sales are colected in the month e One-haif of a monti's inventony purchases s pais for in the month of purchase,the other haif s paid for in the following month. The accounts payable alt March 31 are the resut of March purchasesof t Monthly expenses are as follows commasons, 12% of sales; g Equipment oosting $2,400 will be purchased for cash in Apnl t?owng sae rer t $3.200 per mont other expenses exch dn depredaton 6% of saies Assume rat tese eepenses-pad moty epreciaten $927 per month (includes depreciation on new assets) borrow in increments of we will assume that interest is not compounded. The company 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 of $20,000. The inerestri onthese loans is 1% per month and for simplioty $1,000 at the beginning of each month, up to a total loan balance would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter Required Using the data above 1. Complete the following schedule

Explanation / Answer

1 Schedule of Expected Cash Collections April May June Quarter Cash Sales 45600 48000 63000 156600 Credit Sales 23600 30400 32000 86000 Total Collections 69200 78400 95000 242600 2 Merchandise Purchases Budget April May June Quarter Budgeted Cost of goods sold 57000 60000 78750 195750 Add:Desired ending inventory 45000 63000 30000 30000 Total Needs 102000 123000 108750 225750 Less: beginning Inventory 45600 45000 63000 45600 Required Purchases 56400 78000 45750 180150 3 Schedule of Expected Cash Disbursements—Merchandise Purchases April May June Quarter March Purchases 26925 26925 April Purchases 28200 28200 56400 May Purchases 39000 39000 78000 June Purchases 22875 22875 Total 55125 67200 61875 184200 Cash Budget April May June Quarter Cash Balance, Beginning 8400 3195 4795 7740 Add:Cash Collections 69200 78400 95000 242600 Total Cash Available 77600 81595 99795 250340 Less: Cash Disbursments For Inventory 55125 67200 61875 184200 For Expenses 16880 17600 22100 56580 For Equipment 2400 0 0 2400 Total Cash Disbursmenrts 74405 84800 83975 243180 Excess/(Deficiency) of cash 3195 -3205 15820 7820 Financing Borrowing 8000 0 8000 Repayments -8000 -8000 Interest -80 -80 Total Financing 0 8000 -8080 -80 Cash Balance Ending 3195 4795 7740 7740 Schedule of Expected Cash Disbursements—Selling and Administrative Expenses April May June Quarter Commission 9120 9600 12600 31320 Rent 3200 3200 3200 9600 Other Expenses 4560 4800 6300 15660 Total Disbursments 16880 17600 22100 56580 Shallow company Income Statement Sales 261000 Cost of goods sold Beginning inventory 45000 add: Purcahses 180150 Goods Available for sale 225150 Less: Ending inventory 30000 195150 Gross margin 65850 Selling and administrative expense Commission 31320 Rent 9600 Depriciation 2781 Other Expenses 15660 Net Operating Income 6489 Less: Interest Expense -80 Net Income 6409 Shilow Company Balance Sheet June 30 Assets Current Assets Cash 7740 Accounts Receivable 42000 Inventory 30000 Total Current Assets 79740 Building and equipment- net 123219 Total Assets 202959 Liabilities And Equity Accounts Payable 22875 Capital Stock 150000 Retained Earnings 30084 Total Liabiliies and equity 202959

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