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 $ 7,700 $ 20,800 $ 40,800 $ 129,600 $ 24,300 $ 150,000 $ 24,600 4 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) $ 52,000 April $ 58,000 May June July $ 73,000 $ 98,000 $ 49,000 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, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $972 per month (includes depreciation on new assets) g. Equipment costing $1.700 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 preceding data: 1. Complete the schedule of expected cash collections 2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases 3. Complete the cash budget 4. Prepare an absorption costing income statement for the quarter ended June 30 5. Prepare a balance sheet as of June 30. Schedule of Expected Cash Collections Cash sales April $ 40,800 May June Quarter Credit sales 20,800 Total collections $ 61,600 Budgeted cost of goods sold Merchandise Purchases Budget Add desired ending merchandise inventory Total needs Less beginning merchandise inventory Required purchases April May June Quarter $51,000 $54,750 43,800 94,800 40,800 $54,000 Budgeted cost of goods sold for April = $68,000 sales x 75% = $51,000. Add desired ending inventory for April = $54,750 x 80% = $43,800. Schedule of Expected Cash Disbursements-Merchandise Purchases March purchases April purchases May purchases June purchases Total disbursements April $ 24,300 May June Quarter $ 24,300 27.000 27,000 54.000 Shilow Company Cash Budget April May June Quarter Beginning cash balance $ 7,700 Add collections from customers 61,600 Total cash available 69,300 Less cash disbursements: For inventory 51,300 For expenses 14,740 For equipment 1,700 Total cash disbursements 67,740 Excess (deficiency) of cash 1,560 available over disbursements Financing Borrowings Repayments Interest Total financing Ending cash balance Shilow Company Income Statement For the Quarter Ended June 30 Cost of goods sold: Selling and administrative expenses Current assets: Total current assets Total assets Stockholders' equity June 30 Assets Liabilities and Stockholders' Equity Total liabities and stockholders ecuity