The following data relate to the operations of Medco Company, a wholesale distributor of consumer goods As of March 31 (USD): Cash 20,500 Accounts payable 45,600 Accounts receivable 12,000 Capital stock 40,000 Inventory 11,800 Retained earnings 71,644 Buildings and equipment (net) 140,000 Assumptions a) Gross margin is of sales 60% b) Actual and budgeted sales data: USD March (actual) 80,000 June 94,000 April 82,000 July 90,000 May 83,000 c) Sales are for cash and on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are the result of March credit sales. Break down between Cash & Credit sales is as follow: Cash Sale 40% Credit Sales 60% Each month's ending inventory should equal 30% of the following month's budgeted cost of goods sold. 30% of a month's inventory purchases are paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable at March 31 are a result of March purchases of inventory. Monthly expenses are as follows: salaries and wages, $10,500 per month; rent, $4,600 per month; other expenses (excluding depreciation), 5% of sales. Assume that these expenses are paid monthly. Depreciation is $1,000 per month (includes depreciation on new assets). Equipment costing $9,000 will be purchased for cash in April. The company must maintain a minimum cash balance of $5,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month; borrowing must be in multiples of $1,000. The annual interest rate is 15%. Interest is paid only at the time of repayment of principal; figure interest on whole months (1/12, 2/12, and so forth). 1) Prepare Schedule of Expected Cash Collections (5 points) USD April May Quarter - Total Cash sales Credit sales Total collections 2) Prepare Merchandise Purchases Budget (8 Points) USD April May June Quarter - Total Explanation Budgeted cost of goods sold Add: desired ending inventory Total needs Less: beginning inventory Required purchases 3) Prepare Schedule of Expected Cash Disbursements-Merchandise Purchases (4 points) April May June Quarter - Total Explanation March purchases April purchases May purchases June purchases Total disbursements 4) Prepare Schedule of Expected Cash Disbursements-Selling and Administrative Expenses (7 April May June Quarter - Total Explanation Salaries and wages Rent Other expenses Total disbursements T oD o o 5) Complete the following cash budget (17 Points) Explanation (Cash deficiency, repayments and interest should be indicated by a minus sign.) April May June June Quarter - Total Cash balance, beginning Add cash collections tions Total cash available Less cash disbursements: For inventory For expenses For equipment Total cash disbursements Excess (deficiency) of cash Financing: Borrowings Repayments Interest Total financing Cash balance, ending 1oo Hoo 6) Prepare an absorption costing income statement for the quarter ended June 30 ( 12 points) Explanation #DIV/0! Income Statement - Qtr Ended June 30 Sales Cost of goods sold: Beginning inventory Purchases Goods available for sale Ending inventory Gross margin Selling and administrative expenses: Salaries and wages Rent Depreciation Other expenses Total S&A Expense Net operating loss Interest expense Net Income/loss 7) Prepare a balance sheet as of June 30 (12 Balance Sheet Jun-30 Explanation Assets Current assets: Cash Accounts receivable Inventory Total current assets Buildings and equipment-net Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Stockholders' equity: Capital stock Retained earnings Total equity Total liabilities and equity Retained earnings: Retained earnings, beginning Add net income (loss) Retained earnings, ending