Question

Company, a wholesale distributor:

     
Current assets as of March 31:           
Cash   $   36,000     
Accounts receivable      48,000     
Inventory      86,400     
Plant and equipment, net      216,000     
Accounts payable      70,400     
Capital shares      290,000     
Retained earnings      26,000     

a.   Gross margin is 25% of sales.
b.   Actual and budgeted sales data are as follows:

           
March (actual)   $   120,000     
April      144,000     
May      156,000     
June      174,000     
July      118,000     

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.   At the end of each month, inventory is to be on hand equal to 80% of the following month’s sales needs, stated at cost.
e.  
One-half of a month’s inventory purchases are paid for in the month of purchase; the other half are paid for in the following month. The accounts payable at March 31 are a result of March purchases of inventory.

f.  
Monthly expenses are as follows: salaries and wages, 12% of sales; rent, $8,000 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $2,300 per month (includes depreciation on new assets).

g.   Equipment costing $2,900 will be purchased for cash in April.
h.  
The company must maintain a minimum cash balance of $9,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month; borrowing must be in multiples of $1,000. The annual interest rate is 12%. Interest is paid only at the time of repayment of principal; figure interest on whole months (1/12, 2/12, and so forth).

Required:
Using the preceding data:
1.   Prepare a schedule of expected cash collections.
      

2.  
Prepare a schedule of inventory purchases and a schedule of expected cash disbursements for purchases.

      

3.   Prepare a schedule of expected cash disbursements for operating expenses.
      

4.  
Prepare a cash budget by month and for the quarter in total. (Any "Repayments" and "Interest" should be indicated by a minus sign.)

      

5.  
Prepare an income statement for the quarter ended June 30.

      

6.   Prepare a balance sheet as of June 30.

Answer 1