The following data relate to the operations of the Shilow Company Current assets
ID: 2583459 • Letter: T
Question
The following data relate to the operations of the Shilow Company
Current assets as of March 31:
Cash - $7900
Accounts Receivable - 21,600
Inventory - 42,000
Building & Equipment, net - 132,000
Accounts Payable - 25,050
Capital Stock - 150,000
Retained Earnings - 28,450
a. Gross Margin is 25% of sales
b. actual and budgeted sales data:
March (actual) - $54,000
April - 70,000
May - 75,000
June - 100,000
July - 51,000
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, $2,700 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $990 per month (includes depreciation on new assets).
Equipment costing $1,900 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 $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
4. Prepare an absorption costing income statement for the quarter ended June 30. Income Statement For the Quarter Ended June 30 Cost of goods sold Seling and administrative expenses 5. Prepare a balance sheet as of June 30. Balance Sheet 30 Assets Curment assets Total assets Liabilities and Stockholders Equity Stockholders' equity Total Sabilities and stockholders equityExplanation / Answer
Income Statement Shillow Company Income Statement For the Quarter Ended June 30 Amount($) Amount($) Total Revenue 244,994 Cost of Goods Sold : 183,750 183,750 61,244 Selling and Administration Exp Commission @ 12% on Sales 29,399 Rent 8,100 Other Expenses @ 6% on Sales 14,700 Deprecition 2,970 Interest On the Bank Loan 230 55,399 Net Income Transferred to Balanace Sheet 5,845 Balance Sheet Shillow Company Balance Sheet as on June 30th Assets : Amount($) 1 Current Assets Accounts Receivable 39,999 Cash 15,566 Invetory 30,600 2 Building and Equipments 130,930 (132000+1900-990*3) Total Assets 217,095 Laibilities and Stakeholders Euity Amount($) 1 Stake Holders Quity 150,000 2 Retained Earnings 28,450 Add: Current Period 5,845 34,295 3 Loans 10,000 4 Accounts Payable 22,800 TotalLiabilities 217,095 Working Notes Cash Balance Statement Amount ($) Amount ($) 1 March April May Jun Opening Balance 7,900 4,499 4,923 Add Sales 41,999 44,999 59,999 Add Accounts Receivable 21,600 27,999 29,999 Less Purchases @ 50% 27,750 35,625 22,800 Less Commission @ 12% on Sales 8,400 9,000 12,000 Less Rent 2,700 2,700 2,700 Less Other Expenses @ 6% on Sales 4,200 4,500 6,000 Less Equipment 1,900 - - Less Accounts Payable 25,050 27,750 35,625 Less Interest On the Bank Loan - - 230 Closing Balance 7,900 1,499 (2,077) 15,566 Add Bank Loan Availed 3,000 7,000 - Notes 1. Bank Loan Shall avail if the Cash Closing Balance is below the $4000 2. Interest Calculated at the rate of 1% per month (4000*1%*3m+7000*1%*2m) Inventory Statement 2 Invetory Statement Amount ($) April May Jun a Opening Invetory 42,000 45,000 60,000 b Purchases 55,500 71,250 45,600 c Closing Invetory 45,000 60,000 30,600 d Cost Of Goods Sold 52,500 56,250 75,000 Gross Margin 17,498 18,748 24,998 e Sales 69,998 74,998 99,998 Notes 1. March month Closing invetory is the 80% of the Cost of Goods Sold of April month 2. Gross Margin is 25% of the Sales i.e 20% of the Cost of Goods Sold 3.Closing Stock calculated by 80% of the Budgeted Cost Of Goods Sold 4. Assuminng the Budgeted Sales are the actual sales for the particler Month Sales Statement Sales Statement April May Jun Sales 69,998 74,998 99,998 Cash (60%) 41,999 44,999 59,999 Credit (40%) 27,999 29,999 39,999 Computation of the Budgeted Cost of Goods Sold Computation of the Budjeted Cost of Goods Sold April May Jun July Budjeted Sales 70,000 75,000 100,000 51,000 Less: Gross Margin @25% 17,500 18,750 25,000 12,750 Budjeted COGS 52,500 56,250 75,000 38,250
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