Total disbursmentsThe 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

Capital stock $ 150,000

Retained earnings $ 13,625

a. The gross margin is 25% of sales.

b. Actual and budgeted sales data:

March (actual) $65,000

April $81,000

May $86,000

June $111,000

July $62,000

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, $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).

g. Equipment costing $3,000 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.

Required:

Using the data above:

1. 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

2. Complete the following:

Merchandise Purchase Budget
	April	May	June	Quarter
Budgeted cost of goods sold	60,750
Add Desired ending inventory	51,600
Total needs	112,350
Less beginning inventory	48,600
Required Purchases	63,750

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 disbursements-Merchandise Purchases
	April	May	June	Quarter
March purchases	29,175			29,175
April purchases	31,875	31,875		63.750
May purchses
June purchases
Total disbursments

3. 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	9,000
Add cash collection	74,600
Total cash available	83,600
Less cash disbursements
For Inventory	61,050
For expenses	18,380
For equipment	3,000
Total cash disbursments	82,430
Excess (deficiency) of cash	1,170
Financing
Borrowings
Repayments
Interest
Total financing
Ending cash balance

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

5. Prepare a balance sheet as of June 30.