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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

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

a. The gross margin is 25% of sales.

b. Actual and budgeted sales data:

March (actual)

$

50,000

April

$

66,000

May

$

71,000

June

$

96,000

July

$

47,000

c. 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.

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

e. 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.

f. 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).

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

h. 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 this question by entering your answers in the tabs below.

Required 1

Required 2

Required 3

Required 4

Required 5

Complete the following schedule:

Schedule of Expected Cash Collections

April

May

June

Quarter

Cash sales

$39,600

Credit sales

20,000

Total collections

$59,600

$0

$0

$0

Required 1

Required 2

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Required 3

Required 4

Required 5

Complete the following:

Merchandise Purchases Budget

April

May

June

Quarter

Budgeted cost of goods sold

$49,500

$53,250

Add desired ending merchandise inventory

42,600

Total needs

92,100

53,250

0

0

Less beginning merchandise inventory

39,600

Required purchases

$52,500

$53,250

$0

$0

Budgeted cost of goods sold for April = $66,000 sales 75% = $49,500.

Add desired ending inventory for April = $53,250 80% = $42,600.

Schedule of Expected Cash DisbursementsMerchandise Purchases

April

May

June

Quarter

March purchases

$23,550

$23,550

April purchases

26,250

26,250

52,500

May purchases

June purchases

Total disbursements

$49,800

$26,250

$0

$76,050

Required 1

Required 3

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Required 3

Required 4

Required 5

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

$7,500

Add collections from customers

59,600

Total cash available

67,100

0

0

0

Less cash disbursements:

For inventory

49,800

For expenses

14,180

For equipment

1,500

Total cash disbursements

65,480

0

0

0

Excess (deficiency) of cash available over disbursements

1,620

0

0

0

Financing:

Borrowings

Repayments

Interest

Total financing

0

0

0

0

Ending cash balance

$1,620

$0

$0

$0

Required 2

Required 4

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Required 3

Required 4

Required 5

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

Shilow Company

Income Statement

For the Quarter Ended June 30

Cost of goods sold:

0

0

0

Selling and administrative expenses:

0

0

0

Required 3

Required 5

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Required 3

Required 4

Required 5

Prepare a balance sheet as of June 30.

Shilow Company

Balance Sheet

June 30

Assets

Current assets:

Total current assets

0

Total assets

$0

Liabilities and Stockholders Equity

Stockholders' equity:

0

Total liabilities and stockholders equity

$0

Required 4

Required 5

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