Question
CHECK FIGURE (2) May purchases: $52,640 (4) May 31 cash balance: $5,600 The following data relate to the operations of Dillinger Company, a wholesale distributor
CHECK FIGURE
(2) May purchases: $52,640
(4) May 31 cash balance: $5,600
The following data relate to the operations of Dillinger Company, a wholesale distributor of consumer goods:
Current assets as of March 31: | |
Cash | $10,500 |
Accounts receivable | $21,000 |
Inventory | $10,080 |
Buildings and equipment (net) | $140,000 |
Accounts payable | $36,500 |
Capital stock | $40,000 |
Retained earnings | $105,080 |
a. Gross margin is 30% of sales.
b. Actual and budgeted sales data:
March (actual) | $70,000 |
April | $72,000 |
May | $73,000 |
June | $84,000 |
July | $80,000 |
c. Sales are 70% for cash and 30% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are the result of March credit sales.
d. Each months ending inventory should equal 20% of the following months budgeted cost of goods sold.
e. 25% of a months inventory purchases are paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable at March 31 are a result of March purchases of inventory.
f. Monthly expenses are as follows: salaries and wages $12,500; rent, $3,600 per month; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $1,000 per month (includes depreciation on new assets).
g. Equipment costing $9,000 will be purchased for cash in April.
h. The company must maintain a minimum cash balance of $5,000. 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; borrowing must be in multiples of $1,000. The annual interest rate is 12%. Interest is paid only at the time of repayment of principal; figure interest on whole months (1/12, 2/12, and so forth).
Required:
Using the above data:
1. Complete the following schedule:
Schedule of Expected Cash Collections | ||||
| April | May | June | Quarter |
Cash sales |
|
|
|
|
Credit sales |
|
|
|
|
Total collections |
|
|
|
|
2. Complete the following:
Merchandise Purchases Budget | ||||
| April | May | June | Quarter |
Budgeted cost of goods sold* | $50,400 | $51,100 |
|
|
Add desired ending inventory | 10,220 |
|
|
|
Total needs | 60,620 |
|
|
|
Less beginning inventory | 10,080 |
|
|
|
Required: purchases | $50,540 |
|
|
|
*For April sales: $72,000 sales 70% cost ratio = $50,400
$51,100 20% = $10,220
Schedule of Expected Cash DisbursementsMerchandise Purchases | ||||
| April | May | June | Quarter |
March purchases | $36,500 |
|
| $36,500 |
April purchases | 12,635 | $37,905 |
| 50,540 |
May purchases |
|
|
|
|
June purchases |
|
|
|
|
Total disbursements | $49,135 |
|
|
|
3. Complete the following:
Schedule of Expected Cash DisbursementsSelling and Administrative Expenses | ||||
| April | May | June | Quarter |
Salaries and wages | $12,500 |
|
|
|
Rent | 3,600 |
|
|
|
Other expenses | 5,760 |
|
|
|
Total disbursements | $21,860 |
|
|
|
4. Complete the following cash budget:
Cash Budget | ||||
| April | May | June | Quarter |
Cash balance, beginning | $10,500 |
|
|
|
Add cash collections | 71,400 |
|
|
|
Total cash available | 81,900 |
|
|
|
Less cash disbursements... |
|
|
|
|
For inventory | 49,135 |
|
|
|
For expenses | 21,860 |
|
|
|
For equipment | 9,000 |
|
|
|
Total cash disbursements | 79,995 |
|
|
|
Excess (deficiency) of cash | 1,905 |
|
|
|
Financing: |
|
|
|
|
Etc. |
|
|
|
|
5. Prepare an absorption costing income statement similar to Schedule 9 for the quarter ending June 30. (Use the functional format in preparing your income statement, as shown in Schedule 9 in the text.)
6. Prepare a balance sheet as of June 30.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started