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

Current assets as of March 31:
Cash	$ 7,500
Accounts receivable	$ 20,000
Inventory	$ 39,600
Building and equipment, net	$ 127,200
Accounts payable	$ 23,550
Common stock	$ 150,000
Retained earnings	$ 20,750

1. The gross margin is 25% of sales.

2. Actual and budgeted sales data:

March (actual)	$ 50,000
April	$ 66,000
May	$ 71,000
June	$ 96,000
July	$ 47,000

3. 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.

4. Each months ending inventory should equal 80% of the following months budgeted cost of goods sold.

5. 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.

6. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,300 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $954 per month (includes depreciation on new assets).

7. Equipment costing $1,500 will be purchased for cash in April.

8. 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.

Shilow Company
Cash Budget
	April	May	June	Quarter
Beginning cash balance	$7,500	$42,600selected answer incorrect	$3,240selected answer incorrect	$7,500selected answer correct
Add collections from customers	59,600	69,000selected answer correct	86,000selected answer correct	214,600selected answer correct
Total cash available	67,100	111,600	89,240	222,100
Less cash disbursements:
For inventory	49,800	60,375selected answer correct	not attempted	not attempted
For expenses	14,180	not attempted	not attempted	not attempted
For equipment	1,500	1,500selected answer incorrect	0selected answer correct	0selected answer incorrect
Total cash disbursements	65,480	61,875	0	0
Excess (deficiency) of cash available over disbursements	1,620	49,725	89,240	222,100
Financing:
Borrowings	2,380selected answer incorrect	not attempted	not attempted	not attempted
Repayments	not attempted	not attempted	not attempted	not attempted
Interest	not attempted	not attempted	not attempted	not attempted
Total financing	2,380	0	0	0
Ending cash balance	$4,000	$49,725	$89,240	$222,100

Shilow Company
Income Statement
For the Quarter Ended June 30
Salesselected answer correct		not attempted
Cost of goods sold:
Beginning inventoryselected answer correct	not attempted
Purchasesselected answer correct	not attempted
Goods available for saleselected answer correct	0
Ending inventoryselected answer correct	not attempted	0
Gross marginselected answer correct		0
Selling and administrative expenses:
Commissionsselected answer correct	not attempted
Rentselected answer correct	not attempted
Depreciationselected answer correct	not attempted
not attempted	not attempted
not attempted	not attempted
Other expensesselected answer correct	not attempted	0
Net operating incomeselected answer correct		0
Interest expenseselected answer correct		not attempted
Net incomeselected answer correct		0

Shilow Company
Balance Sheet
June 30
Assets
Current assets:
Cashselected answer correct	not attempted	not attempted
Accounts receivableselected answer correct	not attempted	not attempted
Inventoryselected answer correct	not attempted	not attempted
not attempted	not attempted	not attempted
not attempted	not attempted	not attempted
Total current assets		0
not attempted		not attempted
Total assets		$0
Liabilities and Stockholders Equity
Accounts payableselected answer correct	not attempted	not attempted
not attempted	not attempted	not attempted
Stockholders' equity:
Retained earningsselected answer correct	not attempted
Common stockselected answer correct	not attempted
not attempted	not attempted
not attempted	not attempted	0
Total liabilities and stockholders equity		$0