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 (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. 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:

*For April sales: $60.000 sales x 75% cost ratio .545.000.

$54,000 x 80% = $43,200

3. Complete the following:

4. Complete the following cash budget:

5. Prepare an absorption costing income statement, similar to the one shown in Schedule 9 in the chapter, tor the quarter ended June 30.

6. Prepare a balance sheet as of June 30.

Schedule of Expected Cash Collections Cash sales Credit sales April May June Quarter $36,000 20,000 Total collections $56,000 Merchandise Purchases Budget Budgeted cost of goods sold Add desired ending inventory Total needs less beginning inventory Required purchases April $45,000* 43,200+ 88,200 36,000 $52,200 May $54,000 June Quarter Schedule of Expected Cash Disbursements-Merchandise Purchases March purchases April purchases May purchases June purchases Total disbursements April $21,750 May June 26,100 $26,100 $47,850 Quarter $21,750 52,200 Schedule of Expected Cash Disbursements-Selling and Administrative Expenses Commissions Rent Other expenses Total disbursements April $7,200 2,500 3,600 $13,300 May June Quarter Cash Budget Cash balance, beginning Add cash collections Total cash available Less cash disbursements: For inventory For expenses For equipment Total cash disbursements Excess(deficiency) of cash Financing: Etc. April $8,000 56,000 64,000 47,850 13,300 1,500 62,650 1,350 May June Quarter