case 8-29

PROBLEM 8-25 Completing a Master Budget L.0-2.LOS-LOS-1.05-1. LO-9. LO-10 The following data relate to the operations of Shilow Company, a wholesale distributor of computer goods Current assets as of March 31 Cash Accounts receivable Inventory Building and equipment not Accounts payable Common stock Returned earnings 58.000 $20.000 $36,000 5120 000 $21.750 $150 000 $12 250 a Theron manis 25% of sales Actuall budeted sales data March (actual) April May June July 550.000 $60.000 572.000 500 000 $48.000 6. Sales are 60% for cash and 40% on Credit Credit sales are collected as the mouth following sale. The accounts receivable at March 31 are a result of March credit sales Each monthsanding memory should equal 80% of the following month's brogeted cost of goods sold One-half of a month toy purchases as paid for an the month of purchase, the other halt is paid for in the following month. The accounts payable at March 31 are the result of March purchases of investory, Monthly expects are as follows commisso, 12% of sales rett, $2.500 per month other expenses (excluding depreciation. Os of sales. Assume that these expenses we pad monthly. Depreciation. is $900 per month (includes depreciation on news Equipment costing $1.500 will be purchased for cash in April. Management would like to maintain cash balance of at least 51.000 at the end of each month The company has an apreement with a local bark that allows the company to borrow in increments of S1.000 at the beginning of each od up to a total loan balance of $20,000. The interest rate on these los is 15 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: June Quarter Cash sales Credit sales. Total collections Schedule of Expected Cash Collections April May $36,000 20,000 $56,000 2. Complete the following June Quarter Budgeted cost of goods sold Add desired ending inventory Total needs Less beginning inventory.. Required purchases Merchandise Purchases Budget April May $45,000 $54.000 43,200 88,200 36,000 $52.200 *For April sales: 560,000 sales x 75% cost ratio - $45,000 $54,000 x 80% - $43.200 April May Schedule of Expected Cash Disbursements--Merchandise Purchases June March purchases... $21,750 April purchases 26,100 $26,100 May purchases... June purchases Total disbursements $47,850 Quarter $21,750 52,200 For April sales: $60,000 sales x 75% cost ratio $45,000 *$54,000 x 80% = $43,200 Schedule of Expected Cash Disbursements-Merchandise Purchases April May June March purchases $21.750 April purchases 26,100 $26,100 May purchases. June purchases Total disbursements $47,850 Quarter $21,750 52,200 3. Complete the following cash budget May June Quarter Cash Budget April $ 8.000 56,000 64,000 Beginning cash balance. Add cash collections... Total cash available.. Less cash disbursements: For inventory For expenses For equipment Total cash disbursements Excess (deficiency) of cash Financing: Etc. 47,850 13,300 1,500 62,650 1,350 4 Using Schedule 9 as your guide, prepare an absorption costing income statement for the quarter ended June 30