Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Environmental And Safety Auditing Program Strategies For Legal International And Financial Issues

Authors: Unhee Kim, John F. Falkenbury, Timothy A. Wilkins, Ralph Rhodes, Richard J. Satterfield

1st Edition

1566702461, 978-1566702461

More Books

Students also viewed these Accounting questions

Question

define the term outplacement

Answered: 1 week ago

Question

describe the services that an outplacement consultancy may provide.

Answered: 1 week ago