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

1. The gross margin is 25% of sales.

2. Actual and budgeted sales data:

March (actual)	$	67,000
April	$	83,000
May	$	88,000
June	$	113,000
July	$	64,000

3. 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.

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

5. 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.

6. 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).

7. Equipment costing $3,200 will be purchased for cash in April.

8. 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:

3. Complete the cash budget.

Shilow Company
Cash Budget
	April	May	June	Quarter
Beginning cash balance	$9,200	$4,110selected answer correct	$4,145selected answer correct	$9,200selected answer correct
Add collections from customers	76,600	86,000selected answer correct	103,000selected answer correct	265,600selected answer correct
Total cash available	85,800	90,110	107,145	274,800
Less cash disbursements:
For inventory	62,550	73,125selected answer correct	68,175selected answer correct	203,850selected answer correct
For expenses	18,940	19,840selected answer correct	24,340selected answer correct	63,120selected answer correct
For equipment	3,200	not attempted	not attempted	3,200selected answer correct
Total cash disbursements	84,690	92,965	92,515	270,170
Excess (deficiency) of cash available over disbursements	1,110	(2,855)	14,630	4,630
Financing:
Borrowings	3,000selected answer correct	7,000selected answer correct	not attempted	10,000selected answer correct
Repayments	not attempted	not attempted	(10,000)selected answer correct	(10,000)selected answer correct
Interest	not attempted	not attempted	(130)selected answer incorrect	(130)selected answer incorrect
Total financing	3,000	7,000	(10,130)	(130)
Ending cash balance	$4,110	$4,145	$4,500	$4,500

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
Salesselected answer correct		$284,000selected answer correct
Cost of goods sold:
Beginning inventoryselected answer correct	49,800selected answer correct
Purchasesselected answer correct	201,600selected answer correct
Goods available for saleselected answer correct	251,400
Ending inventoryselected answer correct	38,400selected answer correct	213,000
Gross marginselected answer correct		71,000
Selling and administrative expenses:
Commissionsselected answer correct	34,080selected answer correct
Rentselected answer correct	12,000selected answer correct
Depreciationselected answer correct	2,349selected answer correct
Other expensesselected answer correct	17,040selected answer correct
not attempted	not attempted
not attempted	not attempted	65,469
Net operating incomeselected answer correct		5,531
Interest expenseselected answer correct		130selected answer incorrect
Net incomeselected answer correct		5,401

5. Prepare a balance sheet as of June 30.

Prepare a balance sheet as of June 30.

Shilow Company
Balance Sheet
June 30
Assets
Current assets:
Cashselected answer correct	not attempted	$4,500selected answer incorrect
Accounts receivableselected answer correct	not attempted	45,200selected answer correct
Inventoryselected answer correct	not attempted	38,400selected answer correct
not attempted	not attempted	not attempted
not attempted	not attempted	not attempted
Total current assets		88,100
Building and equipment-netselected answer correct		105,251selected answer correct
Total assets		$193,351
Liabilities and Stockholders Equity
Accounts payableselected answer correct	not attempted	$27,675selected answer correct
not attempted	not attempted	not attempted
Stockholders' equity:
Common stockselected answer correct	$150,000selected answer correct
Retained earningsselected answer correct	15,676selected answer incorrect
not attempted	not attempted
not attempted	not attempted	165,676
Total liabilities and stockholders equity		$193,351