The following data relate to the operations of Shilow Company, a wholesale distr

Question

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of Mareh 31t $ 8,800 25,200 47,400 s 114,000 Cash Accounts receivable Building and equipment, net Common stock 150,000 $ 16,975 Retained earnings a. The gross margin is 25% of sales. b. Actual and budgeted sales data: Harch (actual) April May June July 63,000 s 79,000 84,000 $109,000 s 60,000 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 March 31 are the result of March purchases of inventory Monthly expenses are as follows: commissions, 12% of s ales; rent, $3,600 per month; other expenses (excluding depreciation), 6%

Explanation / Answer

Solution: Shilow Company Sales Budget For the Quarter ended June 30 April May June Quarter Budgeted Sales in Dollars 79000 84000 109000 272000 Total Budgeted Sales 79000 84000 109000 272000 Shilow Company Expected Cash Collection For the Quarter ended June 30 April May June Quarter Account Receivable 3/31(40% of 63000) 25200 25200 April- Sales 60% of 79000 47400 47400 40% of 79000 31600 31600 May- Sales 60% of 84000 50400 50400 40% of 84000 33600 33600 June - Sales 60% of 109000 65400 65400 Total Cash Collection 72600 82000 99000 253600 Shilow Company Inventory Purchase Budget For the Quarter ended June 30 April May June Quarter Budgeted Cost of Goods Sold(75% of Sales) 59250 63000 81750 204000 Add: Desired Ending Inventory(80% of Next Month's COGS) 50400 65400 36000 36000 Total Needs 109650 128400 117750 240000 Less: Beginning Inventory 47400 50400 65400 47400 Required Inventory Purchase 62250 78000 52350 192600 Shilow Company Cash Disbursement for Purchase For the Quarter ended June 30 April May June Quarter March Accounts Payable-Purchase 28425 28425 April Purchase(50% 0f 62250) 31125 31125 62250 May Purchase(50% 78000) 39000 39000 78000 June Purchase(50% of 52350) 26175 26175 Total cash Disbursement for Purchase 59550 70125 65175 194850 *Account Payable of March - for Purchase Tk88150 will be paid in April Shilow Company Cash Disbursement for operating Expenses For the Quarter ended June 30 April May June Quarter Commission (12% of Sales) 9480 10080 13080 32640 Rent 3600 3600 3600 10800 Other Expenses(6% of Sales) 4740 5040 6540 16320 Total Cash Disbursement 17820 18720 23220 59760 Shilow Company Cash Budget For the Quarter ended June 30 April May June Quarter Beginning Cash Balance 8800 4230 4385 8800 Add: Cash Collection 72600 82000 99000 253600 Total Cash Available 81400 86230 103385 262400 Less: Cash Disbursement Inventory Purchase 59550 70125 65175 194850 Operating Expense 17820 18720 23220 59760 Equipment Purchase 2800 0 0 2800 Total Cash Disbursement 80170 88845 88395 257410 Excess/Deficiency 1230 -2615 14990 4990 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 4230 4385 4760 4760 Shilow Company Budgeted Income Statement For the Quarter ended June 30 Sales 272000 Less: Cost of Goods Sold 204000 Gross Margin 68000 Less: Operating Expenses 59760 Depreciation 2565 Operating Income 5675 Less: Interest Expense 230 Net Income 5445 Shilow Company Budgeted Balance Sheet For the Quarter ended June 30 Current Assets Cash 4760 Account Receivable(40% of 109000) 43600 Inventory 36000 (60000 x 0.75 x 0.80) Total Current Assets 84360 Building and Equipment 114235 (Beginning 114000+New purchase 2800-Depreciation 2565) Total Assets 198595 Liabilities and Equity Account Payable(50% of 52350) 26175 Equity: Common Stock 150000 Retained Earnings: Beginning 16975 add: Net Income 5445 Total 22420 22420 Total Liability and Equity 198595

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