Question
Following is selected information relating to the operations of Shilow Company, a wholesale distributor: Current assets as of March 31: Cash $ 29,000 Accounts receivable
Following is selected information relating to the operations of Shilow Company, a wholesale distributor: |
Current assets as of March 31: | |||
Cash | $ | 29,000 | |
Accounts receivable | 42,000 | ||
Inventory | 75,600 | ||
Plant and equipment, net | 196,000 | ||
Accounts payable | 59,600 | ||
Capital shares | 260,000 | ||
Retained earnings | 23,000 | ||
a. | Gross margin is 25% of sales. |
b. | Actual and budgeted sales data are as follows: |
March (actual) | $ | 105,000 | |
April | 126,000 | ||
May | 138,000 | ||
June | 156,000 | ||
July | 103,000 | ||
|
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. | At the end of each month, inventory is to be on hand equal to 80% of the following months sales needs, stated at cost. |
e. | One-half of a months inventory purchases are paid for in the month of purchase; the other half are 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% of sales; rent, $6,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $2,000 per month (includes depreciation on new assets). |
g. | Equipment costing $2,600 will be purchased for cash in April. |
h. | The company must maintain a minimum cash balance of $8,000. 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 preceding data: 3.
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