The following data relate to the operations of Shilow Company, a wholesale distr

Question

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

I am having some trouble with sections 3 to 5. Sections 1 and 2 are already done but I am going to attach pictures of them for you to have easy access to data you may need. Thankyou.

The following data relate to the operations of Shilow Company. a wholesale distributor of consumer goods Current assets as of March 31: $ 9,200 $ 26, 800 S 49,800 S 104, 400 S 29,925 S 150,000 S 10,275 Cash Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings a. I he gross margin is 25% of Sales b. Actual and budgeted sales data March (actual) April May June Jul $ 67,000 $ 83,000 $ 88,000 $ 113,000 S 64,000 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 f. Monthly expenses are as follows: commissions, 12% of sales, rent, $4,000 per month; other expenses (excluding depreciation), 6% g. Equipment costing $3,200 will be purchased for cash in April accounts payable at March 31 are the result of March purchases of inventory of sales. Assume that these expenses are paid monthly. Depreciation is $783 per month (includes depreciation on new assets) h. 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.

Explanation / Answer

Formula view

Schedule of Expected Cash Collections Month April May June Quarter Cash Sales 49800 52800 67800 170400 Credit Sales 26800 33200 35200 95200 Total cash collections 76600 86000 103000 265600 Merchandise Purchases Budget April May June Total Budgeted cost of goods sold 62250 66000 84750 213000 Add: Desired ending merchandise inventory 52800 67800 38400 38400 Total needs 115050 133800 123150 251400 Less: Beginning merchandise inventory 49800 52800 67800 49800 Required purchases 65250 81000 55350 201600 Schedule of Cash Disbursements for Purchases April May June Total March Purchases 29925 29925 April Purchases 32625 32625 65250 May Purchases 40500 40500 81000 June Purchases 27675 27675 Total cash disbursements 62550 73125 68175 203850 Cash Budget April May June Total a Beginning cash balance 9200 4110 4145 9200 b Add collection from customers 76600 86000 103000 265600 c=a+b Total cash available 85800 90110 107145 274800 Less:cash disbursements: d For inventory 62550 73125 68175 203850 e For expenses 18940 19840 24340 63120 f For equipment 3200 3200 g=d+e+f Total cash disbursement 84690 92965 92515 270170 h=c-g Excess (deficiency) of cash available over disbursements 1110 -2855 14630 4630 Financing: i Borrowings 3000 7000 10000 j Repayments 10000 10000 k Interest 130 130 l=i-j-k Total financing 3000 7000 -10130 -130 m=h+l End cash balance 4110 4145 4500 4500 Income Statement For the Quarter Ended June 30 a Sales 284000 Cost of goods sold: b Beginning Inventory 49800 c Purchases 201600 d=b+c Goods available for sale 251400 e=d-38400 Ending Inventory 38400 213000 f=a-e Gross margin 71000 Selling & admin expenses: g Commissions 34080 h Rent 12000 i Depreciation 2349 j Other Expenses 17040 65469 k=f-j Net operating income 5531 l Interest Expense 130 m=k-l Net income 5401 Balance Sheet Jun-30 Assets Cash 4500 Accounts receivable 45200 Inventory 38400 Total current assets 88100 Plant and equipment, net 105251 =104400-2349+3200 Total assets 193351 Liabilities and Stockholders' Equity Accounts payable 27675 Common stock 150000 Retained earnings 15676 =10275+5401 Total liabilities and stockholders' equity 193351

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