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PROBLEM 727A Completing a Master Budget [LO72, LO74, LO77, LO78, LO79, LO710] PROBLEM 7-27A Completing a Master Budget [L07-2, LO7-4, L07-7, L07- 8, LO7-9, LO7-10

image text in transcribedimage text in transcribedimage text in transcribedPROBLEM 727A Completing a Master Budget [LO72, LO74, LO77, LO78, LO79, LO710]

PROBLEM 7-27A Completing a Master Budget [L07-2, LO7-4, L07-7, L07- 8, LO7-9, LO7-10 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 Inventory. $8,000 $20,000 $36,000 $120,000 $21,750 Building and equipment, net Common stock $12,250 The gross margin is 25% of sales. a. Actual and budgeted sales data: $50,000 $60,000 $72,000 $90,000 March (actual) May June b. 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. Each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold C. d. 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 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). Equipment costing $1,500 will be purchased for cash in April. e. f. 1. Complete the following schedule Schedule of Expected Cash Collections April May June Quarter Cash sales Crodit salos Total collections $36,000 20,000 $56,000 2. Complete the following Merchandise Purchases Budget April 43,200t 36,000 May June Quarter Budgeted cost of goods sold Add dosirod ending inventory Total neods Loss boginning invontory For April sales: $60,000 sales >( 75% cost ratio t$54,000 80% $43,200 $45,000. Schedule of Expected Cash Disbursements-Merchandise Purchases April May June Quarter $21,750 52,200 March purchases April purchases May purchases Juno purchasos Total disbursements $21,750 26,100 $26,100 $47,850 3. Complete the following cash budget Cash Budget Apri May June Quarter Beginning cash balance Add cash colections Total cash availablo Less cash disbursoments: $ 8,000 56,000 64,000 For inventory. For equipment Total cash disbursements Excess (deficiency) of cash Financing: Etc. 47,850 13,300 1,500 62,650 1,350 4. Prepare an absorption costing income statement, similar to the one shown in Schedule 9 in the chapter, for the quarter ended June 30 Prepare a balance sheet as of June 30 5

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