Problem 9-24 Completing a Master Budget [LO2) The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: 20 points Current assets as of March 31: Cash Accounts receivable Inventory Building and equipment, net Accounts payable Capital stack Retained earnings Skipped $ 8,000 $ 20,000 $ 36,000 $ 120,000 $ 21,750 $ 150,000 $ 12,250 eBook a. The gross margin is 25% of sales. b. Actual and budgeted sales data: References March (actual) April May June July $50,000 $60,000 $72,000 $90,000 $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 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 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 data above: 1. Complete the following schedule. Quarter 20 points Schedule of Expected Cash Collections April May June Cash sales $ 36,000 Credit sales 20,000 Total collections $ 56,000 $ 0 $ Skipped 0 $ 0 eBook 1 2. Complete the following: Quarter 20 points Merchandise Purchases Budget April May June Budgeted cost of goods sold $ 45,000 Add desired ending inventory 43,200 Total needs 88,200 0 0 Less beginning inventory 36,000 Required purchases $ 52,200 $ 0 $ Skipped 0 0 $ 0 eBook References Budgeted cost of goods sold for April = $60,000 sales x 75% = $45,000. Add desired ending inventory for April = $54,000 ~ 80% = $43,200. Schedule of Expected Cash Disbursements-Merchandise Purchases April May June Quarter March purchases $ 21,750 $ 21,750 April purchases 26,100 26,100 52,200 May purchases June purchases Total disbursements $ 47,850 $ 26,100 $ 0 $ 73,950 3. Complete the following cash budget: (Cash deficiency, repayments and interest should be indicated by a minus sign.) 20 points April June Quarter Skipped Shilow Company Cash Budget May 8,000 56,000 64,000 $ eBook Beginning cash balance Add cash collections Total cash available Less cash disbursements: For inventory For expenses For equipment Total cash disbursements 47,850 13,300 References 1,500 62,650 1,350 Excess (deficiency) of cash 0 Financing: Borrowings Repayments Interest Total financing Ending cash balance $ 1.350 $ 4. Prepare an absorption costing income statement for the quarter ended June 30. Shilow Company Income Statement For the Quarter Ended June 30 20 points Skipped Cost of goods sold: eBook References Selling and administrative expenses: 5. Prepare a balance sheet as of June 30. Shilow Company Balance Sheet June 30 Assets 20 points Current assets: Skipped eBook Total current assets References Total assets Liabilities and Stockholders' Equity Stockholders' equity: Total liabilities and stockholders' equity $
