The following data relate to the operations of Shilow Company, a wholesale distr
ID: 2528879 • Letter: T
Question
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
7,700
20,800
40,800
129,600
24,300
150,000
24,600
The gross margin is 25% of sales.
Actual and budgeted sales data:
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.
Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.
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, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $972 per month (includes depreciation on new assets).
Equipment costing $1,700 will be purchased for cash in April.
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.
Required:
Using the preceding data:
1. Complete the following schedule:
2. Complete the following:
3. Complete the following cash budget:
4. Prepare an absorption costing income statement for the quarter ended June 30.
5. Prepare a balance sheet as of June 30.
Current assets as of March 31: Cash $7,700
Accounts receivable $20,800
Inventory $40,800
Building and equipment, net $129,600
Accounts payable $24,300
Common stock $150,000
Retained earnings $24,600
Explanation / Answer
3) Cash Budget
Workings notes:
1) Cash collection
b) Purchases payments
4) Income Statement
5)
Cash Budget April May June Quarter Opening cash balance $7,700 $4,560 $4,045 Add: cash receipts $61,600 $71,000 $88,000 $2,20,600 Total cash available $69,300 $75,560 $92,045 $2,36,905 Less: cash disbursements Purchases $51,300 $61,875 $56,925 $1,70,100 Commission $8,160 $8,760 $11,760 $28,680 Rent $2,500 $2,500 $2,500 $7,500 Other expesnes $4,080 $4,380 $5,880 $14,340 Equipemnt purchase $1,700 $1,700 Total cash dusbursements $67,740 $77,515 $77,065 $2,22,320 Excess(deficinecy) of cash available over disbursements $1,560 -$1,955 $14,980 $14,585 Financing Borrowing $3,000 $6,000 -$9,000 Interest -$120 Total financing $9,000 Ending cash balance $4,560 $4,045 $5,860Related Questions
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