The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 8,200 Accounts receivable $ 22,800 Inventory $ 43,800 Building and equipment, net $ 128,400 Accounts payable $ 26,175 Capital stock $ 150,000 Retained earnings $ 27,025 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) $57,000 April $73,000 May $78,000 June $103,000 July $54,000 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, $3,000 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $963 per month (includes depreciation on new assets). g. Equipment costing $2,200 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.

5. Prepare a balance sheet as of June 30 Shilow Company Balance Sheet June 30 Assets Current assets: Cash Account receivable Inventory 5,318 41,200 32,400 78,918 127,711 $206,629 Total current assets uilding and equipment-net Total assets Liabilities and Stockholders' Equity Account payable 23,925 Stockholders' equity Common stock $ 150,000 Retained earnings 32,704: 182,704 $206,629 Total liabilities and stockholders' equity References eBook & Resources Ending cash balance 4,010 $ 4,045$ 24,942$ 34,597 4. Prepare an absorption costing income statement for the quarter ended June 30 Shilow Company Income Statement For the Quarter Ended June 30 Sales $254,000 Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory 152,400 179,100 331,500 141,000 190,500 63,500 Selling and administrative expenses Commissions Rent Depreciation Other expenses 30,480 9,000 2,889 15,240 Net operating income nterest expense Net income 57,609 5,891 212 5,679 Ending cash balance 4,010 $ 4,045$ 24,942$ 34,597 4. Prepare an absorption costing income statement for the quarter ended June 30 Shilow Company Income Statement For the Quarter Ended June 30 Sales $254,000 Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory 152,400 179,100 331,500 141,000 190,500 63,500 Selling and administrative expenses Commissions Rent Depreciation Other expenses 30,480 9,000 2,889 15,240 Net operating income nterest expense Net income 57,609 5,891 212 5,679 June purchases Total disbursements $ 55,050 65,625 $ 60,675$ 83,925 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.) Shilow Company Cash Budget April May June Quarter Beginning cash balance Add cash collections Total cash available Less cash disbursements 8,200 s 66.600 74,800 4.010 s 76,000 80,010 4,045 $ 93,000 97,045 16,255 235,600 251,855 For inventory For expenses For equipment 55,050 16,140 2,200 73,390 1,410 65,625 17,040 60,075 181,350 21,540 54,720 Total cash disbursements 82,665 (2,655) 81,615 236,070 Excess (deficiency) of caslh Financing: 15,430 15,785 Borrowings Repayments Interest 2,600 9,300 9,300 212 18,812 4,045$ 24,942$ 34,597 6,700 9,300 212 Total financing 2,600 6,700 9,512 Ending cash balance 4,010 $ 4. Prepare an absorption costing income statement for the quarter ended June 30 Total collections $ 66,600 76,000 $ 93,000 $ 235,600 2. Complete the following Shilow Company Merchandise Purchases Budget April May June Quarter Budgeted cost of goods soldS 54,750 S 58,500 $ 77,250 Add desired ending inventory Total needs Less beginning inventory Required purchases 46,800 101,550 43,800 61,800 120,300 46,800 32,400 109,650 61,800E 152,400 190,500 141,000 331,500 $ 57,750$ 73,500$ 47,850$ 179,100 Budgeted cost of goods sold for April-$73,000 sales 75%-$54,750 Add desired ending inventory for April-$58,500 x 80%-$46,800 Shilow Company Schedule of Expected Cash Disbursements-Merchandise Purchases April May June Quarter $ 26,17536,750 23,925$ 26,175 57,750 March purchases April purchases May purchases June purchases Total disbursements 28,875 28,875 36,750 $ 55,050 65,625 $ 60,675$ 83,925 Building and equipment, net Accounts payable Capital stock Retained earnings S 128,400 $ 26,175 a. The gross margin is 25% of sales b. Actual and budgeted sales data March (actual) 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. c. d. Each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold. e. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for f. Monthly expenses are as follows: commissions, 12% of sales, rent, $3,000 per month, other expenses g. Equipment costing $2,200 will be purchased for cash in April in the following month. The accounts payable at March 31 are the result of March purchases of inventory (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $963 per month (includes depreciation on new assets) 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 Required Using the data above 1. Complete the following schedule Shilow Company Schedule of Expected Cash Collections Cash sales Credit sales Total collections $ 43,800$ 46,800 S 61,800$ 152,400 2 3 $ 66,600 76,000 $ 93,000$ 235,600