Question
The following data relate to the operations of Lim Corporation, a wholesale distributor of consumer goods: Current assets as of December 31: Cash $ 6,000
The following data relate to the operations of Lim Corporation, a wholesale distributor of consumer goods: |
Current assets as of December 31: | |||
Cash | $ | 6,000 | |
Accounts receivable | 36,000 | ||
Inventory | 9,800 | ||
Buildings and equipment, net | 110,885 | ||
Accounts payable | 32,550 | ||
Common shares | 100,000 | ||
Retained earnings | 30,135 | ||
|
a. | The gross margin is 30% of sales. |
b. | Actual and budgeted sales data are as follows: |
December (actual) | $ | 60,000 | |
January | 70,000 | ||
February | 80,000 | ||
March | 85,000 | ||
April | 55,000 | ||
|
c. | Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales. |
d. | Each months ending inventory should equal 20% of the following months budgeted cost of goods sold. |
e. | One-quarter of a months 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. |
g. | 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. The company has an agreement with a local bank that allows it to borrow up to a total loan balance of $50,000. The interest rate on these loans is 0.5% per month, and interest payments must be made at the end of each month. Assume 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. |
Required: |
1. | Using the data above, complete the following schedule: |
2. | Using the data above, complete the following: |
3. | Using the data above, complete the following schedule: |
4. | Using the data above, complete the following cash budget: (Round your intermediate calculations and final answers to the nearest whole dollar. Cash deficiency, repayments and interest should be indicated by a minus sign.) |
5. | Prepare an absorption costing income statement for the quarter ended March 31. |
6. | Prepare a balance sheet as of March 31. |
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