The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings 9,000 $ 26,000 $ 48,600 $ 109,200 $ 29,175 $ 150,000 $ 13,625 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 65,000 $ 81,000 $ 86,000 $ 111,000 $ 62,000 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 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 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, $3,800 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $819 per month (includes depreciation on new assets). g. Equipment costing $3,000 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. Shilow Company Cash Budget April May 9,000 1,170 74,600 84,000 83,600 85,170 $ $ June Quarter (735) $ 9,000 101,000 259,600 100,265 268,600 61,050 71,625 66,675 199,350 61.440 19,280 23,780 18,380 3,000 82.430 0 Beginning cash balance Add collections from customers Total cash available Less cash disbursements: For inventory For expenses For equipment Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total financing Ending cash balance 0 3,000 263,790 90.905 90.455 1,170 (5,735) 9,810 4,810 0 X 5,000 0 0 0 0 0 5,000 X (5,000) (5,000) (100) X (100) X (5,100) (100) 4,710 $ 4,710 0 5,000 $ 1,170 $ (735) $ Shilow Company Income Statement For the Quarter Ended June 30 Sales $ 278,000 48,600 197.100 245,700 Cost of goods sold: Beginning inventory Purchases Goods available for sale Ending inventory Gross margin Selling and administrative expenses: Commissions 37,200 208,500 69,500 33,360 Rent 11,400 16,680 Other expenses Depreciation 2.457 63,897 Net operating income Interest expense 5,603 100 X 5,503 Net income Balance Sheet June 30 Assets Current assets: Cash Accounts receivable Inventory $ 19,635 X 44,400 37,200 Total current assets Building and equipment-net Total assets Liabilities and Stockholders' Equity Accounts payable 101,235 109,743 $ 210,978 $ 26,925 Stockholders' equity: Common stock Retained earnings $ 150,000 13,625 X 163,625