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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 Accounts receivable
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 $ 8,000 $ 22,000 $ 42,600 $ 130,800 $ 25,425 $ 150,000 $ 27,975 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 55,000 $ 71,000 $ 76,000 $ 101,000 $ 52,000 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, $2,800 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $981 per month (includes depreciation on new assets). g. Equipment costing $2,000 will be purchased for cash in April. h. Management would like to maintai 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. Complete the cash budget. (Cash deficiency, repayments and interest should be indicated by Shilow Company Cash Budget April May 8,000 $ 4,470 June Quarter Beginning cash balance $ 4,865 $ 8,000 229,600 Add collections from customers 64,600 74,000 91,000 Total cash available 72,600 78,470 95,865 237,600 Less cash disbursements: For inventory 53,550 64,125 59,175 176,850 For expenses 15,580 0 2,000 X For equipment 2,000 80,605 80,155 231,890 71,130 144,730 139,330 410,740 1,470 (66,260) (43,465) (173,140) Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings 3,000 7,000 0 10,000 Repayments 0 0 (10,000) (10,000) Interest 0 Total financing (130) (10,130) 3,000 7,000 (130) X (130) $ (173,270) Ending cash balance $ 4,470 $ (59,260) $ (53,595) Required 2 Required 4 > 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 Sales $ 248,000 Cost of goods sold: Beginning inventory Purchases Goods available for sale 0 0 248,000 Ending inventory Gross margin Selling and administrative expenses: Commissions Rent Depreciation Other expenses 0 248,000 $ 248,000 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: Cash Accounts receivable Inventory Total current assets 0 Building and equipment-net Total assets $ 0 Liabilities and Stockholders' Equity Accounts payable Stockholders' equity: 0 Total liabilities and stockholders' equity $ 0
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