The following data relate to the operations of Shilow Company, a wholesale distr
ID: 2445442 • Letter: T
Question
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
a. The gross margin is 25%.
b. Actual and budgeted sales data:
March (actual) $67,000
April $83,000
May $88,000
June $113,000
July $64,000
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 sales; rent, $4,000 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $783 per month (includes depreciation on new assets).
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.
1. Complete the following schedule.
Shilow Company
Schedule of Expected Cash Collections
April May June Quarter
Cash Sales $49,800
Credit Sales 26,800
Total collections $76,600
2. Complete the following
Shilow Company
Merchandise Purchases Budget
April May June Quarter
Budgeted cost of goods sold $62,250
Add desired ending inventory 52,800
Total needs 115,050
Less beginning inventory 49,800
Required purchases $65,250
Budgeted cost of goods sold for April = $83,000 sales × 75% = $62,250.
Add desired ending inventory for April = $66,000 × 80% = $52,800.
Shilow Company
Schedule of Expected Cash Disbursements - Merchandise Purchases
April May June Quarter
March purchases $29,925 $29,925
April purchases 32,625 32,625 65,250
May purchases
June purchases
Total disbursements
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 $9,200
Add cash collections 76,600
Total cash available 85,800
Less cash disbursements:
For inventory 62,550
For expenses 18,940
For equipment 3,200
Total cash disbursements 84,690
Excess (deficiency) of cash 1,110
Financing:
Borrowings
Repayments
Interest
Total financing
Ending cash balance
4. Prepare an absorption costing income statement for the quarter ended June 30.
Shilow Company
Income Statement
For the Quater Ended June 30
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Cost of goods sold:
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Sellig and administrative expenses:
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5. Prepare a balance sheet as of June 30.
Shilow Company
Balance Sheet
June 30
Assets
Current assets:
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Total current asset
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Total assets
Liabilities and Stockholder's Equity
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Stockholder's Equity
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Total liabilities and stockholder's equity
Current assets as of March 31: Cash $ 9,200 Accounts receivable $ 26,800 Inventory $ 49,800 Building and equipment, net $ 104,400 Accounts payable $ 29,925 Capital stock $ 150,000 Retained earnings $ 10,275Explanation / Answer
1) Cash collection Schedule
2)Merchandise purchase budget
3) Schedule of exapected cash disbursement
4) Cash budget
5) Income statement
april May June Quarter Cash sales $49,800 52,800 67,800 170,400 credit sales 26,800 33,200 35,200 95,200 total collection 76,600 86,000 103,000 265,600Related Questions
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