Question

In: Accounting

Problem 8-29 (REV) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data...

Problem 8-29 (REV) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10]

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

   

Current assets as of March 31:

Cash$

7,500

Accounts receivable$

20,000

Inventory$

39,600

Building and equipment, net$

127,200

Accounts payable$

23,550

Common stock$

150,000

Retained earnings$

20,750

The gross margin is 25% of sales.

Actual and budgeted sales data:

   

March (actual)$50,000

April$66,000

May$71,000

June$96,000

July$47,000

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, $2,300 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $954 per month (includes depreciation on new assets).

Equipment costing $1,500 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.

Solutions

Expert Solution

Solution 1:
Schedule of expected cash collections
Particulars April May June Quarter
Budgeted Sales $66,000.00 $71,000.00 $96,000.00 $233,000.00
Cash Sale $39,600.00 $42,600.00 $57,600.00 $139,800.00
Collection for credit sales $20,000.00 $26,400.00 $28,400.00 $74,800.00
Total Collections $59,600.00 $69,000.00 $86,000.00 $214,600.00
Solution 2:
Merchandise Purchase Budget
Particulars April May June Quarter
Budgeted Cost of Goods Sold (75% of Sales) $49,500.00 $53,250.00 $72,000.00 $174,750.00
Add: Desired ending merchandise inventory (80% of next month COGS) $42,600.00 $57,600.00 $28,200.00 $28,200.00
Total Needs $92,100.00 $110,850.00 $100,200.00 $202,950.00
Less: Beginning inventory $39,600.00 $42,600.00 $57,600.00 $39,600.00
Required purchases $52,500.00 $68,250.00 $42,600.00 $163,350.00
Schedule of expected cash disbursement - Merchandise Purchases
Particulars April May June Quarter
March Purchases $23,550.00 $23,550.00
April Purchases $26,250.00 $26,250.00 $52,500.00
May Purchases $34,125.00 $34,125.00 $68,250.00
June Purchases $21,300.00 $21,300.00
Total Disbursement $49,800.00 $60,375.00 $55,425.00 $165,600.00
Solution 3:
Cash Budget - Shilow company
Particulars April May June Quarter
Opening Cash balance $7,500.00 $4,620.00 $4,165.00 $7,500.00
Add: Collection from customers $59,600.00 $69,000.00 $86,000.00 $214,600.00
Total Cash Available $67,100.00 $73,620.00 $90,165.00 $222,100.00
Less - Cash Disbursement:
For Inventory $49,800.00 $60,375.00 $55,425.00 $165,600.00
For Expenses $14,180.00 $15,080.00 $19,580.00 $48,840.00
For Equipment $1,500.00 $0.00 $0.00 $1,500.00
Total Cash disbursement $65,480.00 $75,455.00 $75,005.00 $215,940.00
Excess (deficiency) of cash available over disbursements $1,620.00 -$1,835.00 $15,160.00 $6,160.00
Financing:
Borrowings $3,000.00 $6,000.00 $0.00 $9,000.00
Repayments $0.00 $0.00 -$9,000.00 -$9,000.00
Interest $0.00 $0.00 -$210.00 -$210.00
Total Financing $3,000.00 $6,000.00 -$9,210.00 -$210.00
Ending cash balance $4,620.00 $4,165.00 $5,950.00 $5,950.00
Solution 4:
Absorption costing income statement - Shilow Company
for quarter ended June 30
Particulars Amount
Sales $233,000.00
Cost of goods sold:
Beginning inventory $39,600.00
Purchases $163,350.00
Cost of goods available for sale $202,950.00
Ending inventory $28,200.00 $174,750.00
Gross Margin $58,250.00
Selling and Administrative expenses:
Rent $6,900.00
Other expenses $13,980.00
Depreciation $2,862.00
Sales commission $27,960.00 $51,702.00
Net operating income $6,548.00
Interest expense $210.00
Net Income $6,338.00
Solution 5:
Balance Sheet- Shilow Company
30-Jun
Particulars Amount
Assets:
Cash $5,950.00
Accounts receivables ($96,000*40%) $38,400.00
Inventory $28,200.00
Building and equipment, net ($127,200 +$1,500 - $2,862) $125,838.00
Total Assets $198,388.00
Liabilities and stockholder's Equity:
Accounts payable (42,600*50%) $21,300.00
Common Stock $150,000.00
Retained Earnings ($20,750 + $5,850) $27,088.00
Total liabilities and stockholders equity $198,388.00

Related Solutions

Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 7,200 Accounts receivable $ 18,800 Inventory $ 37,800 Building and equipment, net $ 123,600 Accounts payable $ 22,425 Common stock $ 150,000 Retained earnings $ 14,975 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 47,000 April $...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 8,000 Accounts receivable $ 22,000 Inventory $ 42,600 Building and equipment, net $ 130,800 Accounts payable $ 25,425 Common stock $ 150,000 Retained earnings $ 27,975 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 55,000 April $...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 7,400 Accounts receivable $ 19,600 Inventory $ 39,000 Building and equipment, net $ 126,000 Accounts payable $ 23,175 Common stock $ 150,000 Retained earnings $ 18,825 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 49,000 April $...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 8,700 Accounts receivable $ 24,800 Inventory $ 46,800 Building and equipment, net $ 116,400 Accounts payable $ 28,050 Common stock $ 150,000 Retained earnings $ 18,650 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 62,000 April $...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-29 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 7,200 Accounts receivable $ 18,800 Inventory $ 37,800 Building and equipment, net $ 123,600 Accounts payable $ 22,425 Common stock $ 150,000 Retained earnings $ 14,975 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 47,000 April $...
Problem 8-31 (REV) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an...
Problem 8-31 (REV) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Cash $ 60,000 Accounts receivable 216,000 Inventory 60,750 Buildings and equipment (net) 370,000 Accounts payable $...
Problem 8-27 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate...
Problem 8-27 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:      Current assets as of March 31:      Cash $ 8,000      Accounts receivable $ 20,000      Inventory $ 36,000   Building and equipment, net $ 120,000   Accounts payable $ 21,750   Capital stock $ 150,000   Retained earnings $ 12,250    a. The gross margin is 25% of sales. b. Actual and budgeted sales data:      March...
Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office...
Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Cash $ 44,000 Accounts receivable 203,200 Inventory 58,350 Buildings and equipment (net) 354,000 Accounts payable $ 86,325...
Problem 8-31 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an...
Problem 8-31 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Cash $ 59,000 Accounts receivable 215,200 Inventory 60,600 Buildings and equipment (net) 369,000 Accounts payable $...
Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office...
Problem 8-31 Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Cash $ 60,000 Accounts receivable 216,000 Inventory 60,750 Buildings and equipment (net) 370,000 Accounts payable $ 91,125...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT