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

Current assets as of March 31:

Cash $ 9,200

Accounts receivable $ 26,800

Inventory $ 49,800

Building and equipment, net $ 104,400

Accounts payable $ 29,925

Common stock $ 150,000

Retained earnings $ 10,275

The gross margin is 25% of sales.

Actual and budgeted sales data: March (actual) $ 67,000

April $ 83,000

May $ 88,000

June $ 113,000

July $ 64,000

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, $4,000 per month;

other expenses (excluding depreciation), 6% of sales.

Assume that these expenses are paid monthly. Depreciation is $783 per month (includes depreciation on new assets).

Equipment costing $3,200 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:

Complete the following schedule:

Schedule of Expected Cash Collections
	April	May	June	Quarter
Cash sales	$49,800
Credit sales	26,800
Total collections	$76,600	$0	$0	$0

2. Complete the following:

Complete the following:

Merchandise Purchases Budget
	April	May	June	Quarter
Budgeted cost of goods sold	$62,250	$66,000
Add desired ending merchandise inventory	52,800
Total needs	115,050	66,000	0	0
Less beginning merchandise inventory	49,800
Required purchases	$65,250	$66,000	$0	$0
Budgeted cost of goods sold for April = $83,000 sales 75% = $62,250.
Add desired ending inventory for April = $66,000 80% = $52,800.
Schedule of Expected Cash DisbursementsMerchandise Purchases
	April	May	June	Quarter
March purchases	$29,925			$29,925
April purchases	32,625	32,625		65,250
May purchases
June purchases
Total disbursements	$62,550	$32,625	$0	$95,175

3. Complete the following cash budget:

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	$9,200
Add collections from customers	76,600
Total cash available	85,800	0	0	0
Less cash disbursements:
For inventory	62,550
For expenses	18,940
For equipment	3,200
Total cash disbursements	84,690	0	0	0
Excess (deficiency) of cash available over disbursements	1,110	0	0	0
Financing:
Borrowings
Repayments
Interest
Total financing	0	0	0	0
Ending cash balance	$1,110	$0	$0	$0

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

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

5. Prepare a balance sheet as of June 30.

repare 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