The following data relate to the operations of Shilow Company, a wholesale distr
ID: 2544704 • Letter: T
Question
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
8,300
23,200
44,400
126,000
26,550
150,000
25,350
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, $3,100 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $945 per month (includes depreciation on new assets).
Equipment costing $2,300 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:
Current assets as of March 31: Cash $8,300
Accounts receivable $23,200
Inventory $44,400
Building and equipment, net $126,000
Accounts payable $26,550
Common stock $150,000
Retained earnings $25,350
ssignment Saved Complete this question by entering your answers in the tabs below. Required Required 2 Required 3 Required 4 Required 5 Complete the following schedule: Schedule of Expected Cash Collections Cash sales Credit sales Total collections April May June Quarter $ 44,400 23,200 $ 67,600 S0 S0 Require Prey 1 of 2Explanation / Answer
Schedule of expected cash collections:
April
May
June
Quarter
Cash sales (60% of total sales)
44400
47400
62400
154200
Credit sales (40% of sales of previous month)
23200
29600
31600
84400
67600
77000
94000
238600
Merchandise purchase budget:
April
May
June
Quarter
Budgeted cost of goods sold
55500
59250
78000
192750
Add: Desired ending inventory
47400
62400
33000
33000
Total requirements
102900
121650
111000
335550
Less: Beginning inventory
-44400
-47400
-62400
-47400
Required purchases
58500
74250
48600
181350
Purchases
April
May
June
Quarter
March
26550
26550
April
29250
29250
58500
May
37125
37125
74250
June
24300
24300
Total Disbursements
55800
66375
61425
183600
Schedule of expected cash disbursement:
April
May
June
Quarter
Commissions [12% of sales]
8880
9480
12480
30840
Rent
3100
3100
3100
9300
Other expenses
4440
4740
6240
15420
16420
17320
21820
55560
Schedule of cash budget
April
May
June
Quarter
Beginning cash Balance
8300
4380
4685
17365
Add: collection from customers
67600
77000
94000
238600
Total cash available
75900
81380
98685
255965
Less: Cash disbursements:
For inventory
55800
66375
61425
183600
For expenses
16420
17320
21820
55560
For equipment
2300
2300
Total cash disbursements
74520
83695
83245
241460
Excess (deficeincy of cash)
1380
-2315
15440
14505
Financing
Borrowing s
3000
7000
10000
Repayments
0
0
-10000
-10000
Interest
0
0
230
230
Total finanicing
3000
7000
Ending cash Balance
4380
4685
15440
24505
Income statement
$
$
Sales
253000
Cost of Goods sold
Beginning inventory
44400
Purchases
189750
Goods available for sale
234150
Ending inventory
33000
201150
Gross Margin
51850
Selling and administration expense
Commissions [12% of sales]
30840
Rent
9300
Other expenses
15420
Net operating income
36430
Interest expense
230
Net income (loss)
36200
Schedule of expected cash collections:
April
May
June
Quarter
Cash sales (60% of total sales)
44400
47400
62400
154200
Credit sales (40% of sales of previous month)
23200
29600
31600
84400
67600
77000
94000
238600
Merchandise purchase budget:
April
May
June
Quarter
Budgeted cost of goods sold
55500
59250
78000
192750
Add: Desired ending inventory
47400
62400
33000
33000
Total requirements
102900
121650
111000
335550
Less: Beginning inventory
-44400
-47400
-62400
-47400
Required purchases
58500
74250
48600
181350
Purchases
April
May
June
Quarter
March
26550
26550
April
29250
29250
58500
May
37125
37125
74250
June
24300
24300
Total Disbursements
55800
66375
61425
183600
Schedule of expected cash disbursement:
April
May
June
Quarter
Commissions [12% of sales]
8880
9480
12480
30840
Rent
3100
3100
3100
9300
Other expenses
4440
4740
6240
15420
16420
17320
21820
55560
Schedule of cash budget
April
May
June
Quarter
Beginning cash Balance
8300
4380
4685
17365
Add: collection from customers
67600
77000
94000
238600
Total cash available
75900
81380
98685
255965
Less: Cash disbursements:
For inventory
55800
66375
61425
183600
For expenses
16420
17320
21820
55560
For equipment
2300
2300
Total cash disbursements
74520
83695
83245
241460
Excess (deficeincy of cash)
1380
-2315
15440
14505
Financing
Borrowing s
3000
7000
10000
Repayments
0
0
-10000
-10000
Interest
0
0
230
230
Total finanicing
3000
7000
Ending cash Balance
4380
4685
15440
24505
Income statement
$
$
Sales
253000
Cost of Goods sold
Beginning inventory
44400
Purchases
189750
Goods available for sale
234150
Ending inventory
33000
201150
Gross Margin
51850
Selling and administration expense
Commissions [12% of sales]
30840
Rent
9300
Other expenses
15420
Net operating income
36430
Interest expense
230
Net income (loss)
36200
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