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PROBLEM 8-25 Completing a Master Budget [L02, L04, LO7, L08, L09, L010 The following data relate to the operations of Shilow Company, a wholesale distributor of en distributor of consumer goods, Current assets as of March 31: Cash Accounts receivable Inventory Building and equipment, net Accounts payable .... Capital stock .... Retained earnings $8,000 $20,000 $36,000 $120,000 $21,750 $150,000 $12,250 The gross margin is 25% of sales Actual and budgeted sales data: Profit Planning March (actual $50.000 $72.000 $30.000 $48.000 Each month's ending 604 for cash and 40% on credit. Credit sales are collected in the month following sale. The unts receivable at March 31 are a result of March credits month's ending inventory should equal 80% of the following months bedsted out of goods sold. hult of a month's inventory purchases is paid for in the month of in the following month. The accounts payable at March 31 are the rest of March purchases of the sher half is paid inventory. Monthly expenses are as follows: commissions, 12% of sales, rent, 200 per month other expenses escluding depreciation), 6% of sales. Assume that these expenses are paid monthly, Depreciation is 5000 per month (includes depreciation on new assets) Equipment costing $1,500 will be purchased for each 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 incre ments 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 end of the The company would, as far as it is able, repay the loan plus accumulated interest quarter. Required: 1. Complete the following schedule: May June Quarter Schedule of Expected Cash Collections April Cash sales $36,000 Credit sales 20,000 Total collections $56,000 2. Complete the following: Merchandise Purchases Budget April May $54,000 $45,000 Budgeted cost of goods sold........... Add desired ending inventory........... Total needs.................. Less beginning inventory........ .... Required purchases... 43.2009 88,200 35,000 $52.200 "For April sales: $60,000 sales x 75% cost ratio - $45,000 *$54,000 X 80%-$43,200 Chapter 8 May June Quarter $21,750 52.200 $26,100 Schedule of Expected Cash Disbursements-Merchandise Purcha April March purchases ... $21,750 April purchases 26,100 May purchases June purchases.. Total disbursements ... $47,850 3. Complete the following: June Quarter Schedule of Expected Cash Disbursements-Selling and Administrative Exp April May Commissions ..... $ 7,200 2,500 Other expenses... Total disbursements $13,300 Rent ..... 3,600 4. Complete the following cash budget: Cash Budget April $ 8,000 56,000 64,000 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. 11 111 47,850 13,300 1,500 62,650 1,350