Question

In: Accounting

The following data relate to the operations of Soper Company, a wholesale distributor of consumer goods...

The following data relate to the operations of Soper Company, a wholesale distributor of consumer goods as of March 31:

  Cash $ 8,000
  Accounts receivable 20,000
  Inventory 36,000
  Building and equipment, net 120,000
  Accounts payable 21,750
  Common shares 150,000
  Retained earnings 12,250
a. The gross margin is 25% of sales.
b. Actual and budgeted sales data are as follows:
  March (actual) $ 50,000
  April $ 60,000
  May $ 72,000
  June $ 90,000
  July $ 48,000
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.

Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.

e.

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.

f.

Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets).

g.

Equipment costing $1,500 will be purchased for cash in April.

h.

The company must maintain a minimum cash balance of $4,000. 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. The monthly interest rate is 1%. Interest must be paid at the end of each month based on the total loans outstanding for that month.

   

Required:
Using the data above, complete the following statements and schedules for the second quarter:
1. Schedule of expected cash collections:

       

2-a. Merchandise purchases budget :

              

2-b.

Schedule of expected cash disbursements for merchandise purchases:

             

3.

Schedule of expected cash disbursements for selling and administrative expenses:

        

4.

Cash budget: (Round your intermediate calculations and final answers to the nearest whole dollar. Also, round up your interest calculations to the next whole dollar amount. Cash deficiency, repayments and interest should be indicated by a minus sign.)

          

5.

Prepare an absorption costing income statement for the quarter ending June 30.

           

6. Prepare a balance sheet as of June 30.

      

Solutions

Expert Solution

1
Schedule of Expected Cash Collections
April May June Quarter
Cash Sales 36000 43200 54000 133200
Credit Sales 20000 24000 28800 72800
Total Collections 56000 67200 82800 206000
2
Merchandise Purchases Budget
April May June Quarter
Budgeted Cost of goods sold 45000 54000 67500 166500
Add:Desired ending inventory 43200 54000 28800 28800
Total Needs 88200 108000 96300 195300
Less: beginning Inventory 36000 43200 54000 36000
Required Purchases 52200 64800 42300 159300
3
Schedule of Expected Cash Disbursements—Merchandise Purchases
April May June Quarter
March Purchases 21750 21750
April Purchases 26100 26100 52200
May Purchases 32400 32400 64800
June Purchases 21150 21150
Total 47850 58500 53550 159900
Cash Budget
April May June Quarter
Cash Balance, Beginning 8000 1350 4590 8000
Add:Cash Collections 56000 67200 82800 206000
Total Cash Available 64000 68550 87390 214000
Less: Cash Disbursments
For Inventory 47850 58500 53550 159900
For Expenses 13300 15460 18700 47460
For Equipment 1500 0 0 1500
Total Cash Disbursmenrts 62650 73960 72250 208860
Excess/(Deficiency) of cash 1350 -5410 15140 5140
Financing
Borrowing 10000 0 10000
Repayments -10000 -10000
Interest -100 -100
Total Financing 0 10000 -10100 -100
Cash Balance Ending 1350 4590 5040 5040
Schedule of Expected Cash Disbursements—Selling and Administrative Expenses
April May June Quarter
Commission 7200 8640 10800 26640
Rent 2500 2500 2500 7500
Other Expenses 3600 4320 5400 13320
Total Disbursments 13300 15460 18700 47460
Sooper company
Income Statement
Sales 222000
Cost of goods sold
Beginning inventory 36000
add: Purcahses 159300
Goods Available for sale 195300
Less: Ending inventory 28800 166500
Gross margin 55500
Selling and administrative expense
Commission 26640
Rent 7500
Depriciation
900*3
2700
Other Expenses 13320
Net Operating Income 5340
Less: Interest Expense -100
Net Income 5240
Sooper Company
Balance Sheet
June 30
Assets
Current Assets
Cash 5040
Accounts Receivable
90000*40%
36000
Inventory 28800
Total Current Assets 69840
Building and equipment- net
120,000+1500-2700
118800
Total Assets 188640
Liabilities And Equity
Accounts Payable 21150
Capital Stock 150000
Retained Earnings 17490
Total Liabiliies and equity 188640

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