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. a. The gross margin is 25% of sales. b. Actual and budgeted sales data: $ 7,500 $ 20,000 $ 39,600 $ 127,200 $ 23,550 $ 150,000 $ 20,750 Complete the schedule of expected cash collections. Schedule of Expected Cash Collections April Cash sales Credit sales $ 39,600 20,000 Total collections $ 59,600 May March (actual) April $ 50,000 $ 66,000 June Quarter Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases May June July $ 71,000 $ 96,000 $ 47,000 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 at March 31 are the result of March purchases of inventory. f. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,300 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $954 per month (includes depreciation on new assets). g. Equipment costing $1,500 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. Budgeted cost of goods sold Merchandise Purchases Budget April May June Quarter $ 49,500 $ 53,250 Add desired ending merchandise inventory Total needs 42,600 92,100 39,600 52,500 Less beginning merchandise inventory Required purchases Budgeted cost of goods sold for April = $66,000 sales 75% = $49,500. Add desired ending inventory for April = $53,250 x 80% = $42,600. Schedule of Expected Cash Disbursements-Merchandise Purchases April May June Quarter March purchases $ April purchases 23,550 26,250 $ 26,250 23,550 52,500 May purchases June purchases Total disbursements 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. Prepare a balance sheet as of June 30. Shilow Company Balance Sheet June 30 Complete the cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Beginning cash balance Add collections from customers Total cash available Less cash disbursements: For inventory Shilow Company Cash Budget April May June Quarter $ 7,500 59,600 67,100 Current assets: Total current assets Total assets Stockholders' equity: Assets Liabilities and Stockholders' Equity Total liabilities and stockholders' equity For expenses For equipment Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments 49,800 14,180 1,500 65,480 1,620 Interest Total financing Ending cash balance 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: Selling and administrative expenses: