Chrome File Edit View History Bookmarks People Window Help * Assignments: ACG 20

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Chrome File Edit View History Bookmarks People Window Help * Assignments: ACG 2071-CR, HW 8 C O ezto.mheducation.com/hmtpx The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31 Cash Accounts receivable Inventory Building and equipment, net Accounts payable Capital stock Retained eamings S 7,400 S 19,600 $ 39,000 $126,000 S 23,175 S150,000 S 18,825 a. The gross margin is 25% of sales. b. Actual and budgeted sales data March (actual) April May June July $49,000 $65,000 $70,000 $95,000 $46,000 Sales are 60%for cash and 40% accounts receivable at March 31 are a result of March credit sales Credit sales are collected in the month following sale. The c. credit d. Each month's te eadin vetny should equal t or the fohowing morths budgeed coast of goods sold. inventory n the following month. The accounts payable at March 31 are the result of March purchases of ·Mothly expenses are as folows: commissions, 12% of sales; rent, $2,200 per month other expenses .6% of sales. Assume that these expenses are paid monthly. Deprecation is $945 per month (includes depreciation on new assets) Equipment costing $1,400 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 compainy to borrow in ncrements of $1,000 at the beginning of each month, up to a total koan balance of $20.000. Tho inberest loans 1% per moren and kr simplicity wo wil assurma that nterest is not compounded. The oompany would, as far as it is able, repay the loan plus accumulated interest at the end of the Required 1 Complete the wing schedule. 39,00042,000 57,000 S 138 .000

Explanation / Answer

2) Merchandise purchases budget: April May June Quarter Budgeted cost of goods sold (75% of Sales) $48,750 $52,500 $71,250 $172,500 Add desired ending inventory = 80% of Next month COGS $42,000 $57,000 $27,600 $27,600 Total needs $90,750 $109,500 $98,850 $200,100 Less beginning inventory $39,000 $42,000 $57,000 $39,000 Required purchases $51,750 $67,500 $41,850 $161,100 June 30 desired ending inventory: July sales $46,000 × 75% cost ratio × 80% $27,600 Schedule of expected cash disbursements—merchandise purchases April May June Quarter March purchases $23,175 $23,175 April purchases $25,875 $25,875 $51,750 May purchases $33,750 $33,750 $67,500 June Purchases $20,925 $20,925 Total disbursements $49,050 $59,625 $54,675 $163,350 3) Shilow Cash Budget April May June Quarter Cash balance, beginning $7,400 $4,650 $4,225 $7,400 Add: Cash Collection $58,600 $70,000 $95,000 $223,600 Total cash available $66,000 $74,650 $99,225 $231,000 Less disbursements For inventory $49,050 $59,625 $54,675 $163,350 For expenses. $13,900 $14,800 $19,300 $48,000 For Equipment $1,400 $1,400 Total disbursements $64,350 $74,425 $73,975 $212,750 Excess (deficiency) of Cash $1,650 $225 $25,250 $18,250 Financing: Borrowings $3,000 $4,000 $0 $7,000 Repayment $0 $0 -$7,000 -$7,000 Interest -$170 -$170 Total financing $3,000 $4,000 -$7,170 -$170 Cash balance, ending $4,650 $4,225 $18,080 $18,080 Schedule of expected cash disbursements—selling and administrative expenses expenses April May June Quarter Commissions $7,800 $8,400 $11,400 $27,600 Rent $2,200 $2,200 $2,200 $6,600 Other expenses $3,900 $4,200 $5,700 $13,800 Total disbursements $13,900 $14,800 $19,300 $48,000 Interest = Interest ($3,000 × 1% × 3 + $4,000 × 1% × 2)

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