Problem 7-27A Completing a Master Budget CLO7-2, LO 7-4, LO7-7, LO7-8, LO7-9, LO7-101 The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31 Cash 8.000 Accounts receivable 20,000 Inventory 36,000 120,000 Building and equipment, n Accounts payable 21,750 150,000 Capital stock Retained earnings 12,250 a. The gross margin is 25% of sales b. Actual and budgeted sales data $50,000 March (actual) $60,000 Apri May $72,000 $90,000 June July $48,000 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, $2,500 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) g. Equipment costing $1,500 will be purchased for cash in Apri 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, a far as it is able, repay the loan plus accumulated interest at the end of the quarter