The following data relate to the operations of Shilow Company, a wholesale distr
ID: 2783670 • Letter: T
Question
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
7,400
19,600
39,000
126,000
23,175
150,000
18,825
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, $2,200 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 $1,400 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:
1. Complete the following schedule:
2. Complete the following:
3. Complete the following cash budget:
4. Prepare an absorption costing income statement for the quarter ended June 30.
5. Prepare a balance sheet as of June 30.
Complete the following:
Complete the following cash budget: (Cash deficiency, repayments and interest should be indicated by a minus sign.)
Prepare an absorption costing income statement for the quarter ended June 30.
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Prepare a balance sheet as of June 30.
Current assets as of March 31: Cash $7,400
Accounts receivable $19,600
Inventory $39,000
Building and equipment, net $126,000
Accounts payable $23,175
Common stock $150,000
Retained earnings $18,825
Explanation / Answer
1. Merchandise Purchase Budget :
Schedule of Expected Cash Disbursements for Merchandise Purchases:
Shillow Company
Cash Budget
For the quarter ended June 30
Shilow Company
Budgeted Income Statement
For the year ended June 30
Shillow Company
Budgeted Balance Sheet
June 30
April May June July $ $ $ $ Cost of Goods Sold 48,750 52,500 71,250 34,500 Desired Ending Inventory 42,000 57,000 27,600 Total Merchandise Needed 90,750 109,500 98,850 Less: Beginning Inventory 39,000 42,000 57,000 Budgeted Merchandise Purchases 51,750 67,500 41,850Related Questions
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