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Q1 The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $
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The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 7,500 $ 20,000 $ 39,600 127,200 $ 23,550 150,000 $ 20,750 Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings a. The gross margin is 25% of sales. b. Actual and budgeted sales data March (actual) April May June July $ 50,000 $ 66,000 $ 71,000 $ 96,000 $ 47,000 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, $2,300 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $954 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 in increments of $1,000 at the beginning of each month, up to aStep by Step Solution
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