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

Current assets as of March 31:

Cash

$

9,300

Accounts receivable

$

27,200

Inventory

$

50,400

Building and equipment, net

$

102,000

Accounts payable

$

30,300

Capital stock

$

150,000

Retained earnings

$

8,600

a. The gross margin is 25% of sales.

b. Actual and budgeted sales data:

March (actual)	$68,000
April	$84,000
May	$89,000
June	$114,000
July	$65,000

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

e. 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.

f. Monthly expenses are as follows: commissions, 12% of sales; rent, $4,100 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $765 per month (includes depreciation on new assets).

g. Equipment costing $3,300 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.

*Complete the following:

1. Complete the following cash budget: (Borrow and repay in increments of $1,000. Cash deficiency, repayments and interest should be indicated by a minus sign.)

Shilow Company
Cash Budget
	April	May	June	Quarter
Beginning cash balance	$9,300	$4,080	$4,085	??????
Add cash collections	77,600	87,000	104,000	??????
Total cash available	86,900	91,080	108,085	??????
Less cash disbursements:
For inventory	63,300	73,875	68,925	??????
For expenses	19,220	??????	??????	??????
For equipment	3,300	??????	??????	??????
Total cash disbursements	85,820	??????	??????	??????
Excess (deficiency) of cash	1,080	??????	??????	??????
Financing:
Borrowings	3,000	7,000	??????	??????
Repayments	??????	?????	??????	??????
Interest	??????	??????	??????	??????
Total financing	?????	??????	?????	?????
Ending cash balance	??????	?????	?????	??????

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

Shilow Company
Income Statement
For the Quarter Ended June 30
Sales		$287,000
Cost of goods sold:
Beginning inventory	???????
Purchases	???????
Goods available for sale	???????
Ending inventory	???????	????????
Gross margin		????????
Selling and administrative expenses:
Commissions	34,440
Rent	12,300
Other expenses	17,220
Depreciation	2,295
?????????????	???????
?????????????	???????	???????
Net operating income		???????
??????????????		???????
Net income		???????

3. Prepare a balance sheet as of June 30.

Shilow Company
Balance Sheet
June 30
Assets
Current assets:
Cash		????
Account receivable		????
Inventory		????
????????????		????
????????????		????
Total current assets		????
????????????		????
Total assets		$????
Liablities and Stockholder's Equity
Account payable		$????
???????????????		????
Stockholder's equity:
Retained earnings	$????
Common stock	?????
?????????????	?????
?????????????	?????	?????
Total liablities and stockholder's equity		$????