The following data relate to the operations of Shilow Company, a wholesale distr
ID: 2531505 • Letter: T
Question
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
9,300
27,200
50,400
102,000
30,300
150,000
8,600
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, $4,100 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $765 per month (includes depreciation on new assets).
Equipment costing $3,300 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.
Required 1
Required 2
Required 3
Required 4
Required 5
Complete the following schedule:
Required 2
Required 3
Required 4
Required 5
Complete the following:
Complete the following cash budget: (Cash deficiency, repayments and interest should be indicated by a minus sign.)
Prepare an absorption costing income statement for the quarter ended June 30.
Prepare a balance sheet as of June 30.
Current assets as of March 31: Cash $9,300
Accounts receivable $27,200
Inventory $50,400
Building and equipment, net $102,000
Accounts payable $30,300
Common stock $150,000
Retained earnings $8,600
Explanation / Answer
1) Shilow company Schedule of Expected cash collections April May June Quarter Cash sales 50400 53400 68400 172200 credit sales 27,200 33600 35600 96,400 total collections 77600 87000 104000 268600 Accounts receivable = 114000*40%= 45600 2) Merchandise purchase budget April May June Quarter Budgeted cost of goods sold 63000 66750 85500 215250 48750 Add Desired ending inventory 53400 68400 39,000 39,000 total needs 116400 135150 124500 254250 less beginning inventory 50,400 53,400 68,400 50,400 Required purchases 66,000 81,750 56,100 203,850 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 30,300 30,300 April purchases 33000 33,000 66000 May purchases 40875 40,875 81750 June purchases 28050 28050 total disbursements 63,300 73875 68925 206,100 Accounts payable june 30 = 28,050 4) Cash budget April May June Quarter Beginning cash balance 9,300 4,080 4,085 9,300 Add Cash collectiosn 77600 87000 104000 268600 total cas h available 86,900 91,080 108,085 277,900 less cash disbursements for inventory 63,300 73875 68925 206,100 for expenses 19220 20120 24620 63960 for equipment 3,300 0 0 3,300 total cash disbursements 85,820 93995 93545 273,360 Excess(Deficiency)of cash 1,080 -2,915 14,540 4,540 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 4,080 4,085 4,310 4,310 interest = 3000*1%*3= 90 7000*1%*2= 140 230 5) income statement Sales 287000 cost of goods sold Beginning inventor 50,400 Add purchases 203,850 goods available for sale 254,250 ending inventory 39,000 215,250 Gross margin 71,750 Selling and administrative expense commissions 34440 rent (4100*3) 12300 Depreciation (765*3) 2295 other expenses 17220 66255 net operating 5,495 interest expense 230 net income 5,265 Balance sheet Assets current assets Cash 4,310 Accounts receivable 45,600 inventory 39,000 total current assets 88,910 Building And equipment ,net (102,000+3300-2295) 103005 total Assets 191,915 liabilities And stockholder 's Equity Accounts payable 28,050 total current assets 28,050 Stockholder's Equity Capital stock 150,000 Retained earnings(8,600+5265) 13,865 163,865 total liabilites & stockholders Equity 191,915
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