The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods Current assets as of March 31 Cash$7,100 Accounts receivable$18,400 Inventory$37,200 Building and equipment, net$122,400 Accounts payable$22,050 Common stock$150,000 Retained earnings$13,050 The gross margin is 25 of sales Actual and budgeted sales data March (actual)$46,000April$62,000May$67,000June$92,000July$43,000 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 Each month's ending inventory should equal 80 of the following month's budgeted cost of goods sold 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 Monthly expenses are as follows commissions, 12 of sales rent, $1,900 per month other expenses (excluding depreciation), 6 of sales Assume that these expenses are paid monthly Depreciation is $918 per month (includes depreciation on new assets) Equipment costing $1,100 will be purchased for cash in April 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

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Posted on Jun 25, 2024

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

Current assets as of March 31:Cash$7,100

Accounts receivable$18,400

Inventory$37,200

Building and equipment, net$122,400

Accounts payable$22,050

Common stock$150,000

Retained earnings$13,050

March (actual)$46,000April$62,000May$67,000June$92,000July$43,000

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.
Each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold.
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.
Monthly expenses are as follows: commissions, 12% of sales; rent, $1,900 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $918 per month (includes depreciation on new assets).
Equipment costing $1,100 will be purchased for cash in April.
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.