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

Current assets as of March 31:
Cash	$	7,400
Accounts receivable	$	19,600
Inventory	$	39,000
Building and equipment, net	$	126,000
Accounts payable	$	23,175
Common stock	$	150,000
Retained earnings	$	18,825

The gross margin is 25% of sales.

Actual and budgeted sales data:

March (actual)	$	49,000
April	$	65,000
May	$	70,000
June	$	95,000
July	$	46,000

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

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.

Monthly expenses are as follows: commissions, 12% of sales; rent, $2,200 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $945 per month (includes depreciation on new assets).

Equipment costing $1,400 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 following schedule:

2. Complete the following:

3. Complete the following cash budget:

4. Prepare an absorption costing income statement for the quarter ended June 30.

5. Prepare a balance sheet as of June 30.

Complete the following:

Merchandise Purchases Budget
	April	May	June	Quarter
Budgeted cost of goods sold	$48,750	$52,500	$71,250	$172,500
Add desired ending merchandise inventory	42,000	57,000	27,600	?
Total needs	90,750	109,500	98,850	172,500
Less beginning merchandise inventory	39,000	42,000	57,000	?
Required purchases	$51,750	$67,500	$41,850	$172,500
Budgeted cost of goods sold for April = $65,000 sales 75% = $48,750.
Add desired ending inventory for April = $52,500 80% = $42,000.
Schedule of Expected Cash DisbursementsMerchandise Purchases
	April	May	June	Quarter
March purchases	$23,175	?	?	$23,175
April purchases	25,875	25,875	?	51,750
May purchases	?	?	?	?
June purchases	?	?	?	?
Total disbursements	$49,050	$25,875	$0	$74,925

Complete the following cash budget: (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Shilow Company
Cash Budget
	April	May	June	Quarter
Beginning cash balance	$7,400
Add collections from customers	58,600
Total cash available	66,000	0	0	0
Less cash disbursements:
For inventory	49,050
For expenses	13,900
For equipment	1,400
Total cash disbursements	64,350	0	0	0
Excess (deficiency) of cash available over disbursements	1,650	0	0	0
Financing:
Borrowings
Repayments
Interest
Total financing	0	0	0	0
Ending cash balance	$1,650	$0	$0	$0

Prepare an absorption costing income statement for the quarter ended June 30.

Shilow Company
Income Statement
For the Quarter Ended June 30
Sales
Cost of goods sold:
Beginning inventory
Purchases
Goods available for sale	0
Ending inventory		0
Gross margin		0
Selling and administrative expenses:
Commissions
Rent
Depreciation
Other expenses
		0
Net operating income		0
Interest expense
Net income		0

Prepare a balance sheet as of June 30.

Shilow Company
Balance Sheet
June 30
Assets
Current assets:
Cash
Accounts receivable
Inventory
Total current assets		0
Building and equipment-net
Total assets		$0
Liabilities and Stockholders Equity
Accounts payable
Stockholders' equity:
Common stock
Retained earnings
		0
Total liabilities and stockholders equity		$0