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

1. The gross margin is 25% of sales.

2. Actual and budgeted sales data:

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, $3,700 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $837 per month (includes depreciation on new assets).

7. Equipment costing $2,900 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:

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.

Current assets as of March 31: Cash 8,900 25,600 $ $ Accounts receivable 48,000 111,600 $ Inventory Building and equipment, net Accounts payable 28,800 150,000 $ Common stock Retained earnings 15,300 March (actual April May 64,000 $ 80,000 $85,000 110,000 $ 61,000 June July Complete the schedule of expected cash collections. Schedule of Expected Cash Collections April May June Quarter Cash sales Credit sales $ 48,000 $70,000 25,600 40,000 $ 0 110,000 $73,600 $ Total collections $ 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 $60,000 $63,750 Add desired ending merchandise inventory 51,000 Total needs 111,000 63,750 0 0 Less beginning merchandise inventory 48,000 $63,000 $63,750 Required purchases $ $ 0 0 Budgeted cost of goods sold for April $80,000 sales x 75% = $60,000 Add desired ending inventory for April $63,750 x 80% $51,000. Schedule of Expected Cash Disbursements-Merchandise Purchases April May June Quarter March purchases April purchases May purchases June purchases $28,800 28,800 31,500 31,500 63,000 $60,300 $31,500 $ 0 91,800 Total disbursements Shilow Company Cash Budget April May June Quarter Beginning cash balance |Add collections from customers Total cash available Less cash disbursements $ 8,900 73,600 82,500 0 0 0 For inventory 60,300 For expenses 18,100 For equipment 2,900 Total cash disbursements Excess (deficiency) of cash available over disbursements 81,300 C 0 0 1,200 0 C Financing: Borrowings Repayments Interest Total financing 0 C $ 1,200 $ 0 $ 0$ Ending cash balance C npany Income Statement For the Quarter Ended June 30 Cost of goods sold: 0 0 0 Selling and administrative expenses: 0 0 Shilow Company Balance Sheet June 30 Assets Current assets Total current assets 0 $ Total assets 0 Liabilities and Stockholders' Equity Stockholders' equity: Total liabilities and stockholders' equity $ 0