he following data relate to the operations of Shilow Company, a wholesale distri
ID: 2545657 • Letter: H
Question
he following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 8,200 Accounts receivable $ 22,800 Inventory $ 43,800 Building and equipment, net $ 128,400 Accounts payable $ 26,175 Capital stock $ 150,000 Retained earnings $ 27,025 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) $57,000 April $73,000 May $78,000 June $103,000 July $54,000 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, $3,000 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $963 per month (includes depreciation on new assets). g. Equipment costing $2,200 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. Required: Using the data above: 1. Complete the following schedule. 2. Complete the following: Budgeted cost of goods sold for April = $73,000 sales × 75% = $54,750. Add desired ending inventory for April = $58,500 × 80% = $46,800. 3. Complete the following cash budget: (Borrow and repay in increments of $1,000. Cash deficiency, repayments and interest should be indicated by a minus sign.) 4. Prepare an absorption costing income statement for the quarter ended June 30. 5. Prepare a balance sheet as of June 30.
Explanation / Answer
Required Budgets are as prepared below:
Shillow Company Schedule of expected Cash collections For the quarter ended June 30 Month Particulars April May June Total Sales 73,000 78,000 103,000 254,000 Beginning Accounts Receivable March Credit sales (57,000*.4) 22,800 22,800 April Cash Sales 43,800 43,800 April Credit Sales 29,200 29,200 May Cash sales 46,800 46,800 May Credit Sales 31,200 31,200 June Cash sales 61,800 61,800 June Credit Sales 0 Total collections 66,600 76,000 93,000 235,600 Account receivable for June sale 41,200 Shillow Company Merchandise Purchase Budget For the quarter ended June 30 Month Particulars April May June Total Cost of goods sold (75% of sales) 54,750 58,500 77,250 190,500 Add: Desired Ending merchandise inventory (80% of next month COGS) 46,800 61,800 32,400 32,400 Total needs 101,550 120,300 109,650 222,900 Less: beginning merchandise inventory 43,800 46,800 61,800 43,800 Required purchase 57,750 73,500 47,850 179,100 Shillow Company Schedule of expected Cash payments For the quarter ended June 30 Month Particulars April May June Total Beginning Accounts Payable (a) $26,175 $26,175 April Purchases (b) $28,875 $28,875 $57,750 May Purchases (c ) $36,750 $36,750 $73,500 June Purchases (d) $23,925 $23,925 Total payments (a+b+c+d) $55,050 $65,625 $60,675 $181,350 Shillow Company Cash Budget For the quarter ended June 30 Month Particulars April May June Total Beginning Cash balance 8,200 4,410 4,745 8,200 Add: Collection from customers $66,600 $76,000 $93,000 235,600 cash available for use $74,800 $80,410 $97,745 $243,800 Less: cash Disbursements Merchandise purchase $55,050 $65,625 $60,675 181,350 Commissions (12% of sales) 8,760 9,360 12,360 30,480 Rent 3,000 3,000 3,000 9,000 Other exp (6% of sales) 4,380 4,680 6,180 15,240 Equipment purchase 2,200 0 0 2,200 Total disbusrement 73,390 82,665 82,215 238,270 Cash surplus/Deficit 1,410 -2,255 15,530 5,530 Financing Borrowing 3,000 7,000 10,000 Repayment -10,000 -10,000 Interest -130 -130 Net cash from Financing 3,000 7,000 10,130 -130 Budgeted ending cash balance 4,410 4,745 5,400 5,400 Shillow Company Budgeted Income Statement For the quarter ended June 30 Particulars Amount ($) Amount ($) Sales 254,000 Less: Cost of goods sold (75% of sales) 190,500 Gross margin 63,500 Less: Selling and administartive exp Depreciation (963*3) 2,889 Commissions (12% of sales) 30,480 Rent 9,000 Other exp (6% of sales) 15,240 57,609 Net operating Income 5,891 Interest expense 130 Net Income 5,761 Shillow Company Budgeted balance Sheet Jun-30 Assets Cash 5,400 Accounts Receivable 41,200 Inventory 32,400 Building and equipment Net )(128,400+2,200-2,889) 127,711 Total assets 206,711 Liabilities and Stockholders' Equity Accounts Payable purchases 23,925 Common Stock 150,000 Retained earnings (27,025+5,761) 32,786 Total liabilities and stockholders' equity 206,711 Interest 3,000*2% 60 7,000*1% 70 130Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.