The following data relate to the operations of Shilow Company, a wholesale distr
ID: 2549946 • Letter: T
Question
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
7,100
18,400
37,200
122,400
22,050
150,000
13,050
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, $1,900 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $918 per month (includes depreciation on new assets).
Equipment costing $1,100 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 $7,100
Accounts receivable $18,400
Inventory $37,200
Building and equipment, net $122,400
Accounts payable $22,050
Common stock $150,000
Retained earnings $13,050
Explanation / Answer
1) Shilow company Schedule of Expected cash collections April May June Quarter Cash sales 37200 40200 55200 132600 credit sales 18,400 24800 26800 70,000 total collections 55600 65000 82000 202600 Accounts receivable = 92000*40%= 36800 2) Merchandise purchase budget April May June Quarter Budgeted cost of goods sold 46500 50250 69000 165750 32250 Add Desired ending inventory 40200 55200 25800 25,800 total needs 86700 105450 94800 191550 less beginning inventory 37,200 40,200 55,200 37,200 Required purchases 49,500 65,250 39,600 154,350 cost of goods sold = 75% of sales ending inventory = 80% of following months budgeted cost of goods sold 3) Schedule of Cash disbursements-Merchandise purhcase April May June Quarter March purchases 22,050 22,050 April purchases 24750 24,750 49500 May purchases 32625 32,625 65250 June purchases 19800 19800 total disbursements 46,800 57375 52425 156,600 Accounts payable june 30 = 19,800 4) Cash budget April May June Quarter Beginning cash balance 7,100 4,740 4,405 7,100 Add Cash collectiosn 55600 65000 82000 202600 total cas h available 62,700 69,740 86,405 209,700 less cash disbursements for inventory 46,800 57375 52425 156,600 for expenses 13060 13960 18460 45480 for equipment 1,100 0 0 1,100 total cash disbursements 60,960 71335 70885 203,180 Excess(Deficiency)of cash 1,740 -1,595 15,520 6,520 Financing: Borrowings 3,000 6,000 0 9,000 Repayments 0 -9,000 -9,000 interest 0 -210 -210 total financing 3,000 4405 -9210 -210 Ending cash balance 4,740 4,405 6310 6,310 interest = 3000*1%*3= 90 6000*1%*2= 120 5) income statement Sales 221000 cost of goods sold Beginning inventor 37,200 Add purchases 154,350 goods available for sale 191,550 ending inventory 25,800 165,750 Gross margin 55,250 Selling and administrative expense commissions 26520 rent 5700 Depreciation (918*3) 2754 other expenses 13260 48234 net operating 7,016 interest expense 210 net income 6,806 Balance sheet Assets current assets Cash 6,310 Accounts receivable 36,800 inventory 25,800 total current assets 68,910 Building And equipment ,net (122,400+1100-2754) 120746 total Assets 189,656 liabilities And stockholder 's Equity Accounts payable 19,800 total current assets 19,800 Stockholder's Equity Capital stock 150,000 Retained earnings(13050+6806 19856 169,856 total liabilites & stockholders Equity 189,656
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