The following data relate to the operations of Shilow Company, a wholesale distr
ID: 2397208 • Letter: T
Question
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
8,700
24,800
46,800
116,400
28,050
150,000
18,650
The gross margin is 25% of sales.
Actual and budgeted sales data:
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 month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.
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 March 31 are the result of March purchases of inventory.
Monthly expenses are as follows: commissions, 12% of sales; rent, $3,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $873 per month (includes depreciation on new assets).
Equipment costing $2,700 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:
How do I find the beginning inventory?
Prepare an absorption costing income statement for the quarter ended June 30.
Prepare a balance sheet as of June 30.
Current assets as of March 31: Cash $8,700
Accounts receivable $24,800
Inventory $46,800
Building and equipment, net $116,400
Accounts payable $28,050
Common stock $150,000
Retained earnings $18,650
Explanation / Answer
Solution: Shilow Company Sales Budget For the Quarter ended June 30 April May June Quarter Budgeted Sales in Dollars 78000 83000 108000 269000 Total Budgeted Sales 78000 83000 108000 269000 Shilow Company Expected Cash Collection For the Quarter ended June 30 April May June Quarter Account Receivable 3/31(40% of 62000) 24800 24800 April- Sales 60% of 78000 46800 46800 40% of 78000 31200 31200 May- Sales 60% of 83000 49800 49800 40% of 83000 33200 33200 June - Sales 60% of 108000 64800 64800 Total Cash Collection 71600 81000 98000 250600 Shilow Company Inventory Purchase Budget For the Quarter ended June 30 April May June Quarter Budgeted Cost of Goods Sold(75% of Sales) 58500 62250 81000 201750 Add: Desired Ending Inventory(80% of Next Month's COGS) 49800 64800 35400 35400 Total Needs 108300 127050 116400 237150 Less: Beginning Inventory 46800 49800 64800 46800 Required Inventory Purchase 61500 77250 51600 190350 Shilow Company Cash Disbursement for Purchase For the Quarter ended June 30 April May June Quarter March Accounts Payable-Purchase 28050 28050 April Purchase(50% 0f 61500) 30750 30750 61500 May Purchase(50% 77250) 38625 38625 77250 June Purchase(50% of 51600) 25800 25800 Total cash Disbursement for Purchase 58800 69375 64425 192600 *Account Payable of December - for Purchase Tk88150 will be paid in January Shilow Company Cash Disbursement for operating Expenses For the Quarter ended June 30 April May June Quarter Commission (12% of Sales) 9360 9960 12960 32280 Rent 3500 3500 3500 10500 Other Expenses(6% of Sales) 4680 4980 6480 16140 Total Cash Disbursement 17540 18440 22940 58920 Shilow Company Cash Budget For the Quarter ended June 30 April May June Quarter Beginning Cash Balance 8700 4260 4445 8700 Add: Cash Collection 71600 81000 98000 250600 Total Cash Available 80300 85260 102445 259300 Less: Cash Disbursement Inventory Purchase 58800 69375 64425 192600 Operating Expense 17540 18440 22940 58920 Equipment Purchase 2700 0 0 2700 Total Cash Disbursement 79040 87815 87365 254220 Excess/Deficiency 1260 -2555 15080 5080 Financing: Borrowing 3000 7000 10000 Repayments 0 0 -10000 -10000 Interest(3000*1%*3+7000*1%*2) 0 0 -230 -230 Total Financing 3000 7000 -10230 -230 Ending Cash Balance 4260 4445 4850 4850 Shilow Company Budgeted Income Statement For the Quarter ended June 30 Sales 269000 Less: Cost of Goods Sold 201750 Gross Margin 67250 Less: Operating Expenses 58920 Depreciation 2619 Operating Income 5711 Less: Interest Expense 230 Net Income 5481 Shilow Company Budgeted Balance Sheet For the Quarter ended June 30 Current Assets Cash 4850 Account Receivable(40% of 108000) 43200 Inventory 35400 (59000 x 0.75 x 0.80) Total Current Assets 83450 Building and Equipment 116481 (Beginning 116400+New purchase 2700-Depreciation 2619) Total Assets 199931 Liabilities and Equity Account Payable(50% of 51600) 25800 Equity: Common Stock 150000 Retained Earnings: Beginning 18650 add: Net Income 5481 Total 24131 24131 Total Liability and Equity 199931
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.