problem 10-25

Tollowing for lection 2. Using the president's new assull April, May cted cash disbursements for merchandise inventory a. A merchandise purchases budge b. A schedule of expe purchases for Using the president's new assumptions, prepare a cash budget for the quarter in total. renare a brief memorandum for the president explaining how his revised a and June and for the quarter in total. 3. the cash budget. PROBLEM 10-25 Completing a Master Budget [L04a, L04c, LO4f, LO4g, L04h, LO4 The following data relate to the operations of Shilow Company, a wholesale distibar do sumer goods Current assets as of March 31 $20,000 Building and equipment, net... Accounts payable $21.750 Capital stock . . . . Retained earnings. $12,250 The gross margin is 25% of sales. Acnal and budgeted sales data ou Pu be March (actual) . $50,000 ..$60,000 $72,000 June$90,000 $48,000 60% for cash and 40% on credit. Credit sales are collected in the month following th's ending inventory should equal 80% of the following month's budgeted cost of vable at March 31 are a result of March credit sales. ale. The accounts goods sold purchases of imventory s receiva oc half of a month's inventory purchases is paid for in the month of purchase; the other half is quid for in the following month. The accounts payable at March 31 are the result of March Monthly expenses are as follows: commissions 12% of sales rent. S2.500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets). Equipment costing S1.500 will be purchased for cash in April. 4c, LO48 nterested ll impact llows: pril, May h of sale, ing sale g the col hManagement would like to maintain a minimum cash balance of at least $4,000 at the end of cach month. The company has an agreement with a local bank that allows the company to bor- row 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. Using the preceding data: L Complete the following schedule: f the cost March 31 126,000 Schedule of Expected Cash Collections June April Cash sales Credit sales Total collections $36,000 ..20,000 ..$56,000 2 Complete the following Purchases Budget June Quarter Budgeted cost of goods sold Add desired ending inventory Total needs $45,000 $54,000 43,200 88,200 36,000_ Less beginning inventory $52,200 Sor April sales: S60,000 sales 75% cost ratio-$45,000. : 's54.000 x 80%-$43,200