The following data relate to the operations of Shilow Company, a wholesale distr
ID: 2566204 • Letter: T
Question
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
9,000
26,000
48,600
109,200
29,175
150,000
13,625
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, $3,800 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $819 per month (includes depreciation on new assets).
Equipment costing $3,000 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.
Complete the following schedule:
Complete the following:
Complete the following cash budget: (Cash deficiency, repayments and interest should be indicated by a minus sign.)
repare an absorption costing income statement for the quarter ended June 30.
Prepare a balance sheet as of June 30.
Current assets as of March 31: Cash $9,000
Accounts receivable $26,000
Inventory $48,600
Building and equipment, net $109,200
Accounts payable $29,175
Common stock $150,000
Retained earnings $13,625
Explanation / Answer
Solution:
1) Completing the Following Schedules:
2) Completing the Following Schedules:
Budgeted cost of goods sold for April = $81,000 sales * 75% = $60,750.
Add desired ending inventory for April = $64,500 * 80% = $51,600.
3) Completing the Following Cash Budget:
Shilow Company
Cash Budget
4) Preparing the Income Statement:
Shilow Company
Income Statement
For the Quarter Ended June 30
5) Preparing the Balance Sheet as of June 30:
Shilow Company
Balance Sheet
June 30
Schedule of expected cash collections April May June Quarter Cash Sales $48,600 $51,600 $66,600 $166,800 Credit Sales $26,000 $32,400 $34,400 $92,800 Total Collections $74,600 $84,000 $101,000 $259,600Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.