The following data relate to the operations of Shilow Company, a wholesale distr
ID: 2475003 • Letter: T
Question
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
Current assets as of March 31:
Cash
$
7,700
Accounts receivable
$
20,800
Inventory
$
40,800
Building and equipment, net
$
129,600
Accounts payable
$
24,300
Capital stock
$
150,000
Retained earnings
$
24,600
a.
The gross margin is 25% of sales.
b.
Actual and budgeted sales data:
March (actual)
$52,000
April
$68,000
May
$73,000
June
$98,000
July
$49,000
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.
f.
Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses
(excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $972 per month
(includes depreciation on new assets).
g.
Equipment costing $1,700 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.
Shilow Company
Cash Budget
April
May
June
Quarter
Beginning cash balance
$
7,700
Add cash collections
61,600
Total cash available
69,300
0
0
0
Less cash disbursements:
For inventory
51,300
For expenses
14,740
For equipment
1,700
Total cash disbursements
67,740
0
0
0
Excess (deficiency) of cash
1,560
0
0
0
Financing:
Borrowings
Repayments
Interest
Total financing
0
0
0
0
Ending cash balance
$
1,560
$
0
$
0
$
0
4.
Prepare an absorption costing income statement for the quarter ended June 30.
Shilow Company
Income Statement
For the Quarter Ended June 30
Cost of goods sold:
0
0
0
Selling and administrative expenses:
0
0
0
Prepare a balance sheet as of June 30.
Shilow Company
Balance Sheet
June 30
Assets
Current assets:
Total current assets
0
Total assets
$
0
Liabilities and Stockholders’ Equity
Stockholders' equity:
0
Total liabilities and stockholders’ equity
$
0
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
Explanation / Answer
Ans;
1) April May June Cash sales 40,800 43,800 58,800 Credit sales 20,800 27,200 29,200 Total collections 61,600 71,000 88,000 2) March April May June July 39000 Budgeted cost of goods sold 51000 54750 73500 36750 40800 Add desired ending inventory 43800 58800 29400 79,800 Total needs 94,800 113,550 102900 41,600 Less beginning inventory 40,800 43,800 58,800 38,200 Required purchases 54,000 69,750 44,100 Budgeted cost of goods sold for April = $68,000 sales × 75% = $51,000. Add desired ending inventory for April = $54,750 × 80% = $43,800. April May June March purchases 19,100 April purchases 27,000 27,000 May purchases 34,875 34875 June purchases 22050 Total disbursements 46,100 61,875 56,925Related Questions
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