The following data relate to the operations of Shilow Company, a wholesale distr
ID: 2518655 • 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:
1. Complete the following schedule:
2. Complete the following:
3. Complete the following cash budget:
4. Prepare an absorption costing income statement for the quarter ended June 30.
5. 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
Required 1Required 2 Required 3 Required 4Required 5 Complete the following schedule: Schedule of Expected Cash Collections April $46,800 May JuneQuarter Cash sales Credit sales Total collections 24,800 $71,600Explanation / Answer
1) Shilow company Schedule of Expected cash collections April May June Quarter Cash sales 46800 49800 64800 161400 credit sales 24,800 31200 33200 89,200 total collections 71600 81000 98000 250600 Accounts receivable = 108000*40%= 43200 2) Merchandise purchase budget April May June Quarter Budgeted cost of goods sold 58500 62250 81000 201750 44250 Add Desired ending inventory 49800 64800 35,400 35,400 total needs 108300 127050 116400 237150 less beginning inventory 46,800 49,800 64,800 46,800 Required purchases 61,500 77,250 51,600 190,350 cost of goods sold = 75% of sales ending inventory = 80% of following months budgeted cost of goods sold 3) Schedule of Cash disbursements-Merchandise purhcase April May June Quarter March purchases 28,050 28,050 April purchases 30750 30,750 61500 May purchases 38625 38,625 77250 June purchases 25800 25800 total disbursements 58,800 69375 64425 192,600 Accounts payable june 30 = 25,800 4) Cash budget April May June Quarter Beginning cash balance 8,700 4,260 4,445 8,700 Add Cash collectiosn 71600 81000 98000 250600 total cas h available 80,300 85,260 102,445 259,300 less cash disbursements for inventory 58,800 69375 64425 192,600 for expenses 17540 18440 22940 58920 for equipment 2,700 0 0 2,700 total cash disbursements 79,040 87815 87365 254,220 Excess(Deficiency)of cash 1,260 -2,555 15,080 5,080 Financing: Borrowings 3,000 7,000 0 10,000 Repayments 0 -10,000 -10,000 interest 0 -230 -230 total financing 3,000 7,000 -10230 -230 Ending cash balance 4,260 4,445 4,850 4,850 interest = 3000*1%*3= 90 7000*1%*2= 140 230 5) income statement Sales 269000 cost of goods sold Beginning inventor 46,800 Add purchases 190,350 goods available for sale 237,150 ending inventory 35,400 201,750 Gross margin 67,250 Selling and administrative expense commissions 32280 rent 10500 Depreciation (873*3) 2619 other expenses 16140 61539 net operating 5,711 interest expense 230 net income 5,481 Balance sheet Assets current assets Cash 4,850 Accounts receivable 43,200 inventory 35,400 total current assets 83,450 Building And equipment ,net (116400+2700-2619) 116481 total Assets 199,931 liabilities And stockholder 's Equity Accounts payable 25,800 total current assets 25,800 Stockholder's Equity Capital stock 150,000 Retained earnings(18,650+5481) 24131 174,131 total liabilites & stockholders Equity 199,931
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