Question
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 8,000
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
Current assets as of March 31:
Cash $ 8,000
Accounts receivable $ 29,500
Merchandise inventory $ 36,000
Building and equipment, net.. $120,000
Accounts payable $ 25,750
Common stock $150,000
Retained earnings $ 17,750
The gross margin is 25% of sales. Thus, the cost of merchandise and the cost of goods sold is 75% of selling price.
Actual and budgeted sales data:
February (actual)$45,000
March (actual)$50,000
April...$60,000
May$72,000
June$90,000
July.$48,000
Fifty percent of sales are collected in the month of sale and 40 percent in the following month, and 10 percent in the second month following the month of sale. The accounts receivable on March 31 are the results of February credit sales (i.e., 10% of February has not been collected) and March credit sales (i.e., 50% of March has not been collected).
Each months ending inventory should equal 60% of the following months budgeted cost of goods sold.
Thirty percent of a months inventory purchases is paid for in the month of purchase; the other 70 percent is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.
Required:
(7.5 points) Prepare the cash collection budgets for the second quarter (i.e., April, May, and June).
(2 points) What is the accounts receivable balance at the end of June?
(8 points) Prepare the merchandise purchase budgets (in dollars) the second quarter (April, May, and June). Use the following format:
Cost of Goods sold
Plus: Expected Ending Inventory
Minus: Expected Beginning Inventory
= Merchandise Purchase
(6 points) Prepare the cash disbursement budgets for merchandise purchases for the second quarter (April, May, and June).
(1.5 points) What is the account payable balance for merchandise purchases at the end of June?
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