Please complete #5&6 Problem 7-21A (120 minutes) 1. Schedule of expected cash co

Question

Please complete #5&6 Problem 7-21A (120 minutes) 1. Schedule of expected cash collections: April MayJune Quarter Cash sales $30,000 *$43,200 Credit sales1. 20,00034,000 Total collections S55.000 * S62200 140% of the preceding month's sales. *Given. 6%000 $133,200 88800 72.800 S82.800 206.000 2. Merchandise purchases budget: April May June Quarter Budgeted cost of goods sold....$45,000$ 54,000*,500 $166,500 Add desired ending Total needs Less beginning inventory. 43.200 54,000 8,800 88,200*108,000 9 ,300 195,300 inventory. 36,000*43,a00 54,000 36,000 Required purchases$52.200*$64.800 $42.300 $159.300 For April sales: $60,000 sales x 75% cost ratio-$45,000. At April 30: $54,000 × 80% = $43,200. At June 30: July sales $48,000 x 75% cost ratio × 80% $28,800. *Given Schedule of expected cash disbursements-merchandise purchases March purchases.. $21,750* May purchases.... April May June Quarter 21,750 * 52,200* U4,800 , 'sa,400$ 32400 June purchases Total disbursements. $47.850 $58.500 $53.550 $159,900 en

Explanation / Answer

Step 1 - Absorption costing Income Statement

Shilow Company

Income Statement

For the quarter ended June 30

Step 2 Balance sheet

Shilow company

Balance sheet

For the quarter ended June 30

Note 1 - Retained Earnings

Particulars Sales ($60000 + $72000 + $90000) (A) $222000 Less : Cost of goods sold Beginning Inventory (Given as closing inventory of March 31. $36000 Add : Purchases (Part 2 - Merchandise purchase budget - ($52200 + 64800 + 42300) $159300 Goods available for sale $195300 Less : Ending Inventory (Part 2 - $43200 + 54000 + $28800) (B) $28800 $166500 Gross Margin (A - B) $55500 Less : Operating expenses:- Commission expenses (From Part 3 -Schedule of expected cash disbursement) $26640 Add : Rent (From Part 3) $7500 Add : Depreciation ($900 per month * 3 month) $2700 Add : Other expenses (From Part 3) $13320 $50160 Net Operating Income $5340 Less : Interest expenses (Part4) (Paid in june) $230 Net Income $5110 Note : A simpler computation would be :-$222000 * 75% = $166500

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