The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods Current assets as of March 31 Cash $ 9,000 Accounts receivable $ 26,000 Inventory $ 48,600 Building and equipment, net $ 109,200 Accounts payable $ 29,175 Common stock $ 150,000 Retained earnings $ 13,625 The gross margin is 25 of sales Actual and budgeted sales data March (actual) $ 65,000 April $ 81,000 May $ 86,000 June $ 111,000 July $ 62,000 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, $3,800 per month other expenses (excluding depreciation), 6 of sales Assume that these expenses are paid monthly Depreciation is $819 per month (includes depreciation on new assets) Equipment costing $3,000 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 2 Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases Merchandise Purchases Budget April May June Quarter Budgeted cost of goods sold $60,750 $64,500 Add desired ending merchandise inventory 51,600 Total needs 112,350 64,500 0 0 Less beginning merchandise inventory 48,600 Required purchases $63,750 $64,500 $0 $0 Budgeted cost of goods sold for April $81,000 sales 75 $60,750 Add desired ending inventory for April $64,500 80 $51,600 Schedule of Expected Cash DisbursementsMerchandise Purchases April May June Quarter March purchases $29,175 $29,175 April purchases 31,875 31,875 63,750 May purchases June purchases Total disbursements $61,050 $31,875 $0 $92,925 3 Complete the cash budget Shilow Company Cash Budget April May June Quarter Beginning cash balance $9,000 Add collections from customers 74,600 Total cash available 83,600 0 0 0 Less cash disbursements For inventory 61,050 For expenses 18,380 For equipment 3,000 Total cash disbursements 82,430 0 0 0 Excess (deficiency) of cash available over disbursements 1,170 0 0 0 Financing Borrowings Repayments Interest Total financing 0 0 0 0 Ending cash balance $1,170 $0 $0 $0

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Posted on Jul 22, 2024

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

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, $3,800 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $819 per month (includes depreciation on new assets).
Equipment costing $3,000 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.

2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases.

Merchandise Purchases Budget
	April	May	June	Quarter
Budgeted cost of goods sold	$60,750	$64,500
Add desired ending merchandise inventory	51,600
Total needs	112,350	64,500	0	0
Less beginning merchandise inventory	48,600
Required purchases	$63,750	$64,500	$0	$0
Budgeted cost of goods sold for April = $81,000 sales 75% = $60,750.
Add desired ending inventory for April = $64,500 80% = $51,600.
Schedule of Expected Cash DisbursementsMerchandise Purchases
	April	May	June	Quarter
March purchases	$29,175			$29,175
April purchases	31,875	31,875		63,750
May purchases
June purchases
Total disbursements	$61,050	$31,875	$0	$92,925

3. Complete the cash budget.

Shilow Company
Cash Budget
	April	May	June	Quarter
Beginning cash balance	$9,000
Add collections from customers	74,600
Total cash available	83,600	0	0	0
Less cash disbursements:
For inventory	61,050
For expenses	18,380
For equipment	3,000
Total cash disbursements	82,430	0	0	0
Excess (deficiency) of cash available over disbursements	1,170	0	0	0
Financing:
Borrowings
Repayments
Interest
Total financing	0	0	0	0
Ending cash balance	$1,170	$0	$0	$0