Hello
I need help with required question #23...in the "cash budget" box below, I have highlighted in yellow the answer I need help in.
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash Accounts receivable B,800 Inventory 25,200 Building and equipment, net 47,400 Accounts payable 114,000 Common stock 28,425 Retained earnings 150,000 16,975 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April 63,000 May 79,000 June 84.000 July 109,000 60,000 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, $3,600 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $855 per month (includes depreciation on new assets) g. Equipment costing $2,800 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 schedule of expected cash collections. 2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases. 3. Complete the cash budget. 4. Prepare an absorption costing income statement for the quarter ended June 30. 6. Prepare a balance sheet as of June 30. Required 1 Required 2 Required 3 Required 4 Required 5 Complete the cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Shilow Company Cash Budget April May June Quarter Beginning cash balance $ 8,800 $ 4,230 $ 4,385 17,415 Add collections from customers 72,600 32,000 99,00 253,600 Total cash available $1,400 6,230 103,385 271,015 Less cash disbursements: For inventory 59,550 70,125 65,175 194,850 For expenses 17,820 18,72 23,220 59,760 For equipment 2,800 2,800 Total cash disbursements 80, 170 88,845 38,395 257,410 Excess (deficiency) of cash available over disbursements 1,230 (2,615 14,990 13,605 Financing Borrowings 3,000 7,000 10,000 Repayments (10,000) (10,000 Interest 230) 230) 7,000 (10,230) 230 Total financing 3,00 $ 4,230 $ 4,385 $ 4,760 13,375 Ending cash balance
