The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods Current assets as of March 31 Cash $ 9,300 Accounts receivable $ 27,200 Inventory $ 50,400 Building and equipment, net $ 102,000 Accounts payable $ 30,300 Common stock $ 150,000 Retained earnings $ 8,600 The gross margin is 25 of sales Actual and budgeted sales data March (actual) $ 68,000 April $ 84,000 May $ 89,000 June $ 114,000 July $ 65,000 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, $4,100 per month other expenses (excluding depreciation), 6 of sales Assume that these expenses are paid monthly Depreciation is $765 per month (includes depreciation on new assets) Equipment costing $3,300 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 Complete the schedule of expected cash collections Schedule of Expected Cash Collections April May June Quarter Cash sales $50,400 Credit sales 27,200 Total collections $77,600 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 $63,000 $66,750 Add desired ending merchandise inventory 53,400 Total needs 116,400 Less beginning merchandise inventory 50,400 Required purchases $66,000 Budgeted cost of goods sold for April $84,000 sales 75 $63,000 Add desired ending inventory for April $66,750 80 $53,400 Schedule of Expected Cash DisbursementsMerchandise Purchases April May June Quarter March purchases $30,300 $30,300 April purchases 33,000 33,000 66,000 May purchases June purchases Total disbursements 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

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 25, 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, $4,100 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $765 per month (includes depreciation on new assets).
Equipment costing $3,300 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.

Complete the schedule of expected cash collections.

Schedule of Expected Cash Collections
	April	May	June	Quarter
Cash sales	$50,400
Credit sales	27,200
Total collections	$77,600

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	$63,000	$66,750
Add desired ending merchandise inventory	53,400
Total needs	116,400
Less beginning merchandise inventory	50,400
Required purchases	$66,000
Budgeted cost of goods sold for April = $84,000 sales 75% = $63,000.
Add desired ending inventory for April = $66,750 80% = $53,400.
Schedule of Expected Cash DisbursementsMerchandise Purchases
	April	May	June	Quarter
March purchases	$30,300			$30,300
April purchases	33,000	33,000		66,000
May purchases
June purchases
Total disbursements