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

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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

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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

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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

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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