Problem 8-29 (Algo) Completing a Master Budget (L08-2, L08-4, LO8-7, LO8-8, LO8-9, L08-10] 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 Building and equipment, net Accounts payable Common stock Retained earnings $ 8,400 $ 23,6ee $ 45, pee $ 123, tee $ 26,925 $ 150,000 $ 23,675 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 59, eee $ 75,000 $ 80,000 $ 105, eee $ 56, eee 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 1. Monthly expenses are as follows: commissions, 12% of sales; rent, $3,200 per month other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $927 per month (includes depreciation on new assets). g. Equipment costing $2,400 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 5. Prepare a balance sheet as of line in Cash Budget April May June Quarter $ 8,400 $ 4,350 $ 4,625 $ 8,400 68,600 78,000 95,000 241,600 77,000 82,350 99,625 250,000 67,125 185,850 56,550 16,700 2,400 62,175 22,100 17,600 56,400 2,400 Beginning cash balance Add collections from customers Total cash available Less cash disbursements: For inventory For expenses For equipment Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total financing Ending cash balance 75,650 84,725 84,275 244,650 1,350 (2,375) 15,350 5,350 3,000 7,000 10,000 (10,00%) (130) (10,000) (130) (130) (10.130) 3,000 7,000 4,350 $ 4,625 $ $ CA 5,220 $ 5,220 Shilaw Company Income Statement For the Quarter Ended June 30 Sales $ 260,000 Cost of goods sold: Beginning inventory Purchases Goods available for sale 0 0 Ending inventory Gross margin Selling and administrative expenses: Commissions 260,000 Rent Depreciation Other expenses Interest expense Note payable Net operating income 0 260,000 260,000 Shillow company Balance Sheet June 30 Assets Current assets: Cash $ 260,000 195,000 Accounts receivable Inventory Total current assets 455,000 Building and equipment-net Total assets $ 455,000 Liabilities and Stockholders' Equity (Accounts payable Note payable Stoelholder mit Inventory Total current assets 455,000 $ 455,000 Building and equipment-net Total assets Liabilities and Stockholders' Equity Accounts payable Note payable Stockholders' equity: Retained earnings Common stock 0 Total liabilities and stockholders' equity $ 0 Problem 8-29 (Algo) Completing a Master Budget (L08-2, L08-4, LO8-7, LO8-8, LO8-9, L08-10] 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 Building and equipment, net Accounts payable Common stock Retained earnings $ 8,400 $ 23,6ee $ 45, pee $ 123, tee $ 26,925 $ 150,000 $ 23,675 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 59, eee $ 75,000 $ 80,000 $ 105, eee $ 56, eee 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 1. Monthly expenses are as follows: commissions, 12% of sales; rent, $3,200 per month other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $927 per month (includes depreciation on new assets). g. Equipment costing $2,400 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 5. Prepare a balance sheet as of line in Cash Budget April May June Quarter $ 8,400 $ 4,350 $ 4,625 $ 8,400 68,600 78,000 95,000 241,600 77,000 82,350 99,625 250,000 67,125 185,850 56,550 16,700 2,400 62,175 22,100 17,600 56,400 2,400 Beginning cash balance Add collections from customers Total cash available Less cash disbursements: For inventory For expenses For equipment Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total financing Ending cash balance 75,650 84,725 84,275 244,650 1,350 (2,375) 15,350 5,350 3,000 7,000 10,000 (10,00%) (130) (10,000) (130) (130) (10.130) 3,000 7,000 4,350 $ 4,625 $ $ CA 5,220 $ 5,220 Shilaw Company Income Statement For the Quarter Ended June 30 Sales $ 260,000 Cost of goods sold: Beginning inventory Purchases Goods available for sale 0 0 Ending inventory Gross margin Selling and administrative expenses: Commissions 260,000 Rent Depreciation Other expenses Interest expense Note payable Net operating income 0 260,000 260,000 Shillow company Balance Sheet June 30 Assets Current assets: Cash $ 260,000 195,000 Accounts receivable Inventory Total current assets 455,000 Building and equipment-net Total assets $ 455,000 Liabilities and Stockholders' Equity (Accounts payable Note payable Stoelholder mit Inventory Total current assets 455,000 $ 455,000 Building and equipment-net Total assets Liabilities and Stockholders' Equity Accounts payable Note payable Stockholders' equity: Retained earnings Common stock 0 Total liabilities and stockholders' equity $ 0