Question
In: Accounting
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
| Current assets as of March 31: | ||
| Cash | $ |
8,400 |
| Accounts receivable | $ |
23,600 |
| Inventory | $ |
45,000 |
| Building and equipment, net | $ |
123,600 |
| Accounts payable | $ |
26,925 |
| Common stock | $ |
150,000 |
| Retained earnings | $ |
23,675 |
-
The gross margin is 25% of sales.
-
Actual and budgeted sales data:
| March (actual) | $ | 59,000 |
| April | $ | 75,000 |
| May | $ | 80,000 |
| June | $ | 105,000 |
| July | $ | 56,000 |
-
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, $3,200 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $927 per month (includes depreciation on new assets).
-
Equipment costing $2,400 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 schedule of expected cash collections.
2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases.
3. Complete the 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
| Schedule of Expected Cash Collections | |||||
| Month | |||||
| April | May | June | Quarter | ||
| Cash Sales (Sales*60%) | $ 45,000 | $ 48,000 | $ 63,000 | $ 156,000 | |
| Credit Sales (Previous month sale*40%) | $ 23,600 | $ 30,000 | $ 32,000 | $ 85,600 | |
| Total cash collections | $ 68,600 | $ 78,000 | $ 95,000 | $ 241,600 | |
| Merchandise Purchases Budget | |||||
| April | May | June | Total | ||
| Budgeted cost of goods sold (sales *75%) | $ 56,250 | $ 60,000 | $ 78,750 | $ 195,000 | |
| Add: Desired ending merchandise inventory (next month cogs*80%) | $ 48,000 | $ 63,000 | $ 33,600 | $ 33,600 | |
| Total needs | $ 104,250 | $ 123,000 | $ 112,350 | $ 228,600 | |
| Less: Beginning merchandise inventory | $ 45,000 | $ 48,000 | $ 63,000 | $ 45,000 | |
| Required purchases | $ 59,250 | $ 75,000 | $ 49,350 | $ 183,600 | |
| Schedule of Cash Disbursements for Purchases | |||||
| April | May | June | Total | ||
| March Purchases | $ 26,925 | $ 26,925 | |||
| April Purchases | $ 29,625 | $ 29,625 | $ 59,250 | ||
| May Purchases | $ 37,500 | $ 37,500 | $ 75,000 | ||
| June Purchases | $ 24,675 | $ 24,675 | |||
| Total cash disbursements | $ 56,550 | $ 67,125 | $ 62,175 | $ 185,850 | |
| Cash Budget | |||||
| April | May | June | Total | ||
| a | Beginning cash balance | $ 8,400 | $ 4,350 | $ 4,625 | $ 8,400 |
| b | Add collection from customers | $ 68,600 | $ 78,000 | $ 95,000 | $ 241,600 |
| c=a+b | Total cash available | $ 77,000 | $ 82,350 | $ 99,625 | $ 250,000 |
| Less:cash disbursements: | |||||
| d | For inventory | $ 56,550 | $ 67,125 | $ 62,175 | $ 185,850 |
| e | For expenses | $ 16,700 | $ 17,600 | $ 22,100 | $ 56,400 |
| f | For equipment | $ 2,400 | $ 2,400 | ||
| g=d+e+f | Total cash disbursement | $ 75,650 | $ 84,725 | $ 84,275 | $ 244,650 |
| h=c-g | Excess (deficiency) of cash available over disbursements | $ 1,350 | $ (2,375) | $ 15,350 | $ 5,350 |
| Financing: | |||||
| i | Borrowings | $ 3,000 | $ 7,000 | $ 10,000 | |
| j | Repayments | $ 10,000 | $ 10,000 | ||
| k | Interest | $ 130 | $ 130 | ||
| l=i-j-k | Total financing | $ 3,000 | $ 7,000 | $ (10,130) | $ (130) |
| m=h+l | End cash balance | $ 4,350 | $ 4,625 | $ 5,220 | $ 5,220 |
| Income Statement | |||||
| For the Quarter Ended June 30 | |||||
| a | Sales | $ 260,000 | |||
| Cost of goods sold: | |||||
| b | Beginning Inventory | $ 45,000 | |||
| c | Purchases | $ 183,600 | |||
| d=b+c | Goods available for sale | $ 228,600 | |||
| e=d-38400 | Ending Inventory | $ 33,600 | $ 195,000 | ||
| f=a-e | Gross margin | $ 65,000 | |||
 ekkarill92 answered 1 year agoRelated SolutionsThe following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...The following data relate to the operations of Shilow Company, a
wholesale distributor of consumer goods:
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
The gross margin is 25% of sales.
Actual and budgeted sales data:
March (actual)
$
65,000
April
$
81,000
May
$
86,000
June
$
111,000
July
$
62,000
Sales are...
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...
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
Capital stock
$
150,000
Retained
earnings
$
18,650
a.
The gross margin is 25% of
sales.
b.
Actual and budgeted sales
data:
March (actual)
$62,000
April
$78,000
May
$83,000
June
$108,000
July
$59,000
c....
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...The following data relate to the operations of Shilow Company, a
wholesale distributor of consumer goods:
Current assets as of March 31:
Cash $
7,700
Accounts receivable $
20,800
Inventory $
40,800
Building and equipment, net $
129,600
Accounts payable $
24,300
Common stock $
150,000
Retained earnings $
24,600
The gross margin is 25% of sales.
Actual and budgeted sales data:
March (actual) $ 52,000
April $ 68,000
May $ 73,000
June $ 98,000
July $ 49,000
Sales are...
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...The following data relate to the operations of Shilow Company, a
wholesale distributor of consumer goods:
Current assets as of
March 31:
Cash
$
7,800
Accounts receivable
$
21,200
Inventory
$
41,400
Building and equipment, net
$
130,800
Accounts payable
$
24,675
Common stock
$
150,000
Retained earnings
$
26,525
The gross margin is 25% of sales.
Actual and budgeted sales data:
March (actual)
$
53,000
April
$
69,000
May
$
74,000
June
$
99,000
July
$
50,000
Sales are...
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...The following data relate to the operations of Shilow Company, a
wholesale distributor of consumer goods:
Current assets as of
March 31:
Cash
$
7,800
Accounts receivable
$
21,200
Inventory
$
41,400
Building and equipment, net
$
130,800
Accounts payable
$
24,675
Common stock
$
150,000
Retained earnings
$
26,525
The gross margin is 25% of sales.
Actual and budgeted sales data:
March (actual)
$
53,000
April
$
69,000
May
$
74,000
June
$
99,000
July
$
50,000
Sales are...
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...The following data relate to the operations of Shilow Company, a
wholesale distributor of consumer goods:
Current assets as of
March 31:
Cash
$
8,400
Accounts receivable
$
23,600
Inventory
$
45,000
Building and equipment, net
$
123,600
Accounts payable
$
26,925
Capital stock
$
150,000
Retained earnings
$
23,675
The gross margin is 25% of sales.
Actual and budgeted sales data:
March (actual)
$
59,000
April
$
75,000
May
$
80,000
June
$
105,000
July
$
56,000
...
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...The following data
relate to the operations of Shilow Company, a wholesale distributor
of consumer goods:
Current assets as of March 31:
Cash
$
8,900
Accounts
receivable
$
25,600
Inventory
$
48,000
Building and
equipment, net
$
111,600
Accounts
payable
$
28,800
Common
stock
$
150,000
Retained
earnings
$
15,300
The gross margin is
25% of sales.
Actual and budgeted
sales data:
March
(actual)
$
64,000
April
$
80,000
May
$
85,000
June
$
110,000
July
$
61,000
Sales are...
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...The following data relate to the operations of Shilow Company, a
wholesale distributor of consumer goods:
Current assets as of
March 31:
Cash
$
7,700
Accounts receivable
$
20,800
Inventory
$
40,800
Building and equipment, net
$
129,600
Accounts payable
$
24,300
Common stock
$
150,000
Retained earnings
$
24,600
The gross margin is 25% of sales.
Actual and budgeted sales data:
March (actual)
$
52,000
April
$
68,000
May
$
73,000
June
$
98,000
July
$
49,000
Sales are...
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...The following data
relate to the operations of Shilow Company, a wholesale distributor
of consumer goods:
Current assets as of March 31:
Cash
$
8,900
Accounts
receivable
$
25,600
Inventory
$
48,000
Building and
equipment, net
$
111,600
Accounts
payable
$
28,800
Common
stock
$
150,000
Retained
earnings
$
15,300
The gross margin is
25% of sales.
Actual and budgeted
sales data:
March
(actual)
$
64,000
April
$
80,000
May
$
85,000
June
$
110,000
July
$
61,000
Sales are...
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...The following data relate to the operations of Shilow Company, a
wholesale distributor of consumer goods:
Current assets as of March 31:
Cash
$
7,300
Accounts receivable
$
19,200
Inventory
$
38,400
Building and equipment, net
$
124,800
Accounts payable
$
22,800
Common stock
$
150,000
Retained earnings
$
16,900
The gross margin is 25% of sales.
Actual and budgeted sales data:
March (actual)
$
48,000
April
$
64,000
May
$
69,000
June
$
94,000
July
$
45,000
Sales are...
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