Window Help Safarl Fle Edit View History ezto.mheducation.com 3.25 points The fo
ID: 2547059 • Letter: W
Question
Window Help Safarl Fle Edit View History ezto.mheducation.com 3.25 points The following data relate to the operations of Shilow Company, a wholosale distributor of consumer goods Current assets as of March 31 7,500 20,000 39,600 127,200 23,550 $ 150,000 20,750 Building and equipment, net Accounts payable Capital stock Retained eamings a. The gross margn is 25% of sales. b. Actual and budgeted sales data: $50,000 $66,000 $71,000 $96,000 $47,000 March (actual cash and 40% oneredt. Crede saes ae colected in the month following sale. The of a month's inventory purchases is paid for in the month of purchase; the other hailf is paid for follows commissions, 12% of sales; rent, $2300 per month, other opens s c. Sales are 60% accounts receivable at March 31 are a result of March credit sales n flowing month. The nocounts payable at March 31 heesult of Mwo pudam d (excluding depreciation). 6% of sales Assume that these expenses ao paid montiy Deprecation is d. Each month's ending inventory should equal e. One-half t Monthly expenses are as g Equipment costing $1,500 will be purchased for cash in Aprl $954 per month (includes depreciation on new assets) 20888 8 4Explanation / Answer
Solution:
Part 1 –
Schedule of Expected Cash Collection
April
May
June
Quarter
Cash Sales
$39,600
(66,000*60%)
$42,600
(71,000*60%)
$57,600
(96,000*60%)
$139,800
Credit Sales
$20,000
(Beg AR)
$26,400
(april 66000*40%)
$28,400
(May 71,000*40%)
$74,800
Total Collections
$59,600
$69,000
$86,000
$214,600
Part 2 --
Merchandise Purchase Budget
April
May
June
Quarter
Budgeted Cost of Goods Sold (Sales * 75%)
$49,500
53250
$72,000
$174,750
Add: desired ending inventory (80% of next months COGS)
$42,600
$57,600
$28,200
$28,200
Total needs
$92,100
$110,850
$100,200
$202,950
Less: Beginning Inventory
$39,600
$42,600
$57,600
$39,600
Required purchases
$52,500
$68,250
$42,600
$163,350
Part 3 –
Expected Cash Disbursement - Merchandise Purchase
April
May
June
Quarter
March Purchases
$23,550
April Purchases
$26,250
$26,250
May Purchases
34125
$34,125
June Purchases
$21,300
Total disbursements
$49,800
$60,375
$55,425
$165,600
Part 4 – Cash Budget
Cash Budget
April
May
June
Quarter
Beginning cash balance
$7,500
$4,620
$4,165
$7,500
Add: cash collections
$59,600
$69,000
$86,000
$214,600
Total cash available
$67,100
$73,620
$90,165
$222,100
Less: Cash disbursements
For Inventory
$49,800
$60,375
$55,425
$165,600
For Expense (Refer Note 1)
$14,180
$15,080
$19,580
$48,840
For Equipment
$1,500
$0
$0
$1,500
Total Cash disbursements
$65,480
$75,455
$75,005
$215,940
Excess (deficiency) of cash available over disbursements
$1,620
-$1,835
$15,160
$6,160
Financing
Borrowings
$3,000
$6,000
$9,000
Repayments
-$9,000
-$9,000
Interest (Refer calculation below)
-$210
-$210
Total Financing
$3,000
$6,000
-$9,210
-$210
Ending Cash Balance
$4,620
$4,165
$5,950
$5,950
Note --- Interest paid in June = Loan $3,000*Interest Rate 1%*3 + (6000*1%*2) = $210
Note 1 --- Expenses
Expenses
April
May
June
Total Sales
66000
71000
96000
Expenses:
Commission @ 12% of Sales
7920
8520
11520
Rent
2300
2300
2300
Other expense @ 6% of sales
3960
4260
5760
Total Cash payment for expense
14180
15080
19580
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Pls ask separate question for remaining parts.
Schedule of Expected Cash Collection
April
May
June
Quarter
Cash Sales
$39,600
(66,000*60%)
$42,600
(71,000*60%)
$57,600
(96,000*60%)
$139,800
Credit Sales
$20,000
(Beg AR)
$26,400
(april 66000*40%)
$28,400
(May 71,000*40%)
$74,800
Total Collections
$59,600
$69,000
$86,000
$214,600
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