Question: The following data relate to the operations of Lim Corporation, a wholesale distributor of consumer goods
The following data relate to the operations of Liverpool Corporation, a wholesale distributor of consumer goods: Current assets as of December 31 Accounts receivable. Inventory Buildings and equipment net. Accounts payable Common shares Retained earnings $ 6000 36.000 980 110.885 32550 10000 30125 a. The gross margin is 30% of sales. Actual and budgeted sales data are as follows: December (actual). January February March April $60.000 70.000 80000 85.000 55.000 C. e. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month follow-ing sale. The accounts receivable at December 31 are the result of December credit sales. d. Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold. One-quarter of a month's inventory purchases is paid for in the month of purchase the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. f. Monthly expenses are as follows: commissions. $12,000 rent. $1.800: other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. 8 Equipment will be acquired for cash: $3.000 in January and $8,000 in February h. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. Assume the company can borrow at 0% interest and they do not pay any income tax. All borrowing occurs at the beginning of a month. The company will as far as it is able, repay outstanding loans at the end of each month. The following data relate to the operations of Liverpool Corporation, a wholesale distributor of consumer goods: Current assets as of December 31 Accounts receivable. Inventory Buildings and equipment net. Accounts payable Common shares Retained earnings $ 6000 36.000 980 110.885 32550 10000 30125 a. The gross margin is 30% of sales. Actual and budgeted sales data are as follows: December (actual). January February March April $60.000 70.000 80000 85.000 55.000 C. e. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month follow-ing sale. The accounts receivable at December 31 are the result of December credit sales. d. Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold. One-quarter of a month's inventory purchases is paid for in the month of purchase the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. f. Monthly expenses are as follows: commissions. $12,000 rent. $1.800: other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. 8 Equipment will be acquired for cash: $3.000 in January and $8,000 in February h. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. Assume the company can borrow at 0% interest and they do not pay any income tax. All borrowing occurs at the beginning of a month. The company will as far as it is able, repay outstanding loans at the end of each month
