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 Accounts receivable $ 20,000 Inventory $ 39,600 Building and equipment, net $ 127,200 Accounts payable $ 23,550 Capital stock $ 150,000 Retained earnings $ 20,750

a. The gross margin is 25% of sales. b. Actual and budgeted sales data:

March (actual) $50,000 April $66,000 May $71,000 June $96,000 July $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 months ending inventory should equal 80% of the following months budgeted cost of goods sold. e.

One-half of a months 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 a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required: Using the data above: 1. Complete the following schedule.

Schedule of Expected Cash Collections

	April	May	June	Quarter
Cash Sales	39,600
Credit Sales	20,000
Total Collections	59,600

2.

Complete the following:

Merchandise Purchase Budget

	April	May	June	Quarter
Budgeted costs of goods sold	49,500
Add desired ending inventory	42,600
Total Needs	92,100
Less beginning inventory	39,600
Required Purchases	52,500

Budgeted cost of goods sold for April = $66,000 sales 75% = $49,500. Add desired ending inventory for April = $53,250 80% = $42,600.

Schedule of expected cash disbursements - Merchandise Purchases

	April	May	June	Quarter
March Purchases	23,550			23,550
April Purchases	26,250	26,250		52,500
May Purchases
Junes Purchases
Total Disbursements	49,800	26,250		76,050

3.

Complete the following cash budget: (Borrow and repay in increments of $1,000. Cash deficiency, repayments and interest should be indicated by a minus sign.)

	April	May	June	Quarter
Beginning Cash Balance	7500
Add Cash Collections	59600
Total Cash Available	67100
Less cash disbursements
For inventory	49800
For expenses	14180
For equipment	1500
Total Cash disbursements	65480
Excess (deficiency) of cash	1620
Financing
Borrowings
Repayments
Interest
Total Financing
Ending Cash balance	1620

4.

Prepare an absorption costing income statement for the quarter ended June 30.

Cost of goods sold
	0.00
		0.00
Selling and admin. expenses

5. Prepare a balance sheet as of June 30.

Assests
Current Assests:
Total Current Assests:
Total Assests
Liabilites and Stockholder's Equity
Stockholder's Equity
total liabilities and stockholder's equity