The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings $ 8,200 $ 22,800 $ 43,800 $ 128,400 $ 26,175 $ 150,000 $ 27,025 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 57,000 $ 73,000 $ 78,000 $ 103,000 $ 54,000 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 month's ending inventory should equal 80% of the following month's budgeted cost of goods sold. e. One-half of a month's 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, $3,000 per month; other expenses (excluding depreciation) 6% of sales. Assume that these expenses are paid monthly. Depreciation is $963 per month (includes depreciation on new assets). g. Equipment costing $2,200 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 schedule of expected cash collections. 2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases. 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. Required 1 Required 2 Required 3 Required 4 Required 5 Complete the schedule of expected cash collections. Schedule of Expected Cash Collections April May June Quarter Cash sales $ 43,800 Credit sales 22,800 Total collections $ 66,600 S 0 $ 0 $ 0 Required 1 Required 2 Required 3 Required 4 Required 5 0 0 0 0 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 $ 54,750 58,500 Add desired ending merchandise inventory 46,800 Total needs 101,550 58,500 Less beginning merchandise inventory 43,800 $ Required purchases $ 57,750 $ $ 58,500 Budgeted cost of goods sold for April = $73,000 sales * 75% = $54,750. Add desired ending inventory for April = $58,500 80% = $46,800. Schedule of Expected Cash Disbursements-Merchandise Purchases April May June Quarter March purchases $ 26,175 $ 26,175 April purchases 28,875 28,875 57,750 May purchases June purchases Total disbursements $ 55,050 $ $ 83,925 28,875 0 Required 1 Required 2 Required 3 Required 4 Required 5 0 0 0 Complete the 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 S 8,200 Add collections from customers 66,600 Total cash available 74,800 Less cash disbursements: For inventory 55,050 For expenses 16,140 For equipment 2,200 Total cash disbursements 73,390 Excess deficiency) of cash 1,410 available over disbursements Financing Borrowings Repayments Interest Total financing Ending cash balance S 1,410 0 0 0 0 0 0 0 0 0 0 S 0 S 0 S 0 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 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 S 0 Liabilities and Stockholders' Equity Stockholders' equity: 0 Total liabilities and stockholders' equity $ 0