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

Current assets as of March 31:
Cash	$	9,000
Accounts receivable	$	26,000
Inventory	$	48,600
Building and equipment, net	$	109,200
Accounts payable	$	29,175
Common stock	$	150,000
Retained earnings	$	13,625

The gross margin is 25% of sales.

Actual and budgeted sales data:

March (actual)

$

65,000

April

$

81,000

May

$

86,000

June

$

111,000

July

$

62,000

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.

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

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.

Monthly expenses are as follows: commissions, 12% of sales; rent, $3,800 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $819 per month (includes depreciation on new assets).

Equipment costing $3,000 will be purchased for cash in April.

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 following schedule:

2. Complete the following:

3. Complete the following cash budget:

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

5. Prepare a balance sheet as of June 30.

Complete the following schedule:

Schedule of Expected Cash Collections
	April	May	June	Quarter
Cash sales	$48,600
Credit sales	26,000
Total collections	$74,600	$0	$0	$0

Complete the following:

Merchandise Purchases Budget
	April	May	June	Quarter
Budgeted cost of goods sold	$60,750	$64,500
Add desired ending merchandise inventory	51,600
Total needs	112,350	64,500	0	0
Less beginning merchandise inventory	48,600
Required purchases	$63,750	$64,500	$0	$0
Budgeted cost of goods sold for April = $81,000 sales 75% = $60,750.
Add desired ending inventory for April = $64,500 80% = $51,600.
Schedule of Expected Cash DisbursementsMerchandise Purchases
	April	May	June	Quarter
March purchases	$29,175			$29,175
April purchases	31,875	31,875		63,750
May purchases
June purchases
Total disbursements	$61,050	$31,875	$0	$92,925

Complete the following cash budget: (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Shilow Company
Cash Budget
	April	May	June	Quarter
Beginning cash balance	$9,000			$9,000
Add collections from customers	74,600
Total cash available	83,600	0	0	9,000
Less cash disbursements:
For inventory	61,050
For expenses	18,380
For equipment	3,000
Total cash disbursements	82,430	0	0	0
Excess (deficiency) of cash available over disbursements	1,170	0	0	9,000
Financing:
Borrowings
Repayments
Interest
Total financing	0	0	0	0
Ending cash balance	$1,170	$0	$0	$9,000

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

Shilow Company
Income Statement
For the Quarter Ended June 30
Sales
Cost of goods sold:
Beginning inventory
Purchases
Goods available for sale	0
Ending inventory		0
Gross margin		0
Selling and administrative expenses:
Commissions
Rent
Depreciation
Other expenses
		0
Net operating income		0
Interest expense
Net income		0

Prepare a balance sheet as of June 30.

Shilow Company
Balance Sheet
June 30
Assets
Current assets:
Cash
Accounts payable
Inventory
Total current assets		0
Building and equipment-net
Total assets		$0
Liabilities and Stockholders Equity
Accounts payable
Stockholders' equity:
Common stock
Retained earnings
		0
Total liabilities and stockholders equity		$0