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

Question

The following data relate to the operations of Shilow Company a wholesale distributor of consumer goods Current assets as of March 31 Cash $ 7,800 $ 21,200 41,400 $130,800 $ 24,675 $150,000 s 26,525 Accounts receivable Inventory Building and equipment, net Accounts payable Capital stock Retained earnings The gross margin is 25% of sales. b. Actual and budgeted sales data March (actual) April May June July $53,000 $69.000 $74.000 $99,000 $50,000 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 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, $2,600 per month: other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is 5981 per month includes depreciation on new assets) f. g Equipment costing $1.800 will be purchased for cash in April

Explanation / Answer

Answer a Sales Budget April May June Total Sales                69,000                74,000                 99,000              242,000 Cash Sales - 60%                41,400                44,400                 59,400              145,200 Credit Sales - 40%                27,600                29,600                 39,600                96,800 Answer 1. Schedule of Expected Cash Collections April May June Total Cash Sales                41,400                44,400                 59,400              145,200 Credit Sales                21,200                27,600                 29,600                78,400 Total cash Collections                62,600                72,000                 89,000              223,600 Answer 2. Merchandise Purchase Budget April May June Total Budgeted Cost of Goods Sold - 75% of Sales                51,750                55,500                 74,250              181,500 Add: Ending Inventory                44,400                59,400                 30,000                30,000 Total Needs                96,150              114,900              104,250              211,500 Less: Beginning Inventory              (41,400)              (44,400)              (59,400)              (41,400) Required Purchases                54,750                70,500                 44,850              170,100 Schedule of Expected Cash Disbursements - Merchandise Purchases April May June Total Cash Payment March Purchases                24,675                24,675 April Purchases                27,375                27,375                54,750 May Purchases                35,250                 35,250                70,500 June Purchases                 22,425                22,425 Total Cash Payment to Suppliers                52,050                62,625                 57,675              172,350 Selling & Admn. Budget April May June Total Sales Comm. - 12% of Sales                  8,280                   8,880                 11,880                29,040 Rent (Fixed)                  2,600                   2,600                   2,600                   7,800 Other Expense - 6% of Sales                  4,140                   4,440                   5,940                14,520 Depreciation                      981                      981                       981                   2,943 Total                16,001                16,901                 21,401                54,303 Schedule of Cash payments of Selling & Admn. Budget April May June Total Sales Comm. - 12% of Sales                  8,280                   8,880                 11,880                29,040 Rent (Fixed)                  2,600                   2,600                   2,600                   7,800 Other Expense - 6% of Sales                  4,140                   4,440                   5,940                14,520 Total                15,020                15,920                 20,420                51,360 Answer 3. Cash budget April May June Total Beginning cash Balance                  7,800                   4,530                   4,985                   7,800 Add: Cash Collection                62,600                72,000                 89,000              223,600 Total Cash available                70,400                76,530                 93,985              231,400 Less: Cash Disbursements For Inventory                52,050                62,625                 57,675              172,350 For Expenses                15,020                15,920                 20,420                51,360 For Equipment                  1,800                          -                            -                     1,800 Total Cash Disbursement                68,870                78,545                 78,095              225,510 Cash Balance Closing                  1,530                (2,015)                 15,890                   5,890 Add: Finance from Bank                  3,000                   7,000                10,000 Less: Payment to Bank                         -                            -                (10,000)              (10,000) Less: Payment of interet - Bank loan                         -                            -                      (230)                    (230) Net Cash Balance Closing                  4,530                   4,985                   5,660                   5,660

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