Current assets as of March 31 $ 7,000 $ 18,000 $ 36,600 $121,200 $ 21,675 $150,0

Question

Current assets as of March 31 $ 7,000 $ 18,000 $ 36,600 $121,200 $ 21,675 $150,000 $ 11,125 Cash Accounts receivable Inventory Building and equipment, net Accounts payable Capital stock Retained earnings a. The gross margin is 25% of sales b. Actual and budgeted sales data March (actual) ril May June July $45,000 $61,000 $66,000 $91,000 $42,000 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 f. Monthly expenses are as follows: commissions, 12% of sales, rent, $1,800 per month, other expenses g. Equipment costing $1,000 will be purchased for cash in April in the following month. The accounts payable at March 31 are the result of March purchases of inventory (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $909 per month (includes depreciation on new assets) 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

Explanation / Answer

1) Shilow company Schedule of Expected cash collections April May June Quarter Cash sales 36600 39600 54600 130800 credit sales 18,000 24400 26400 68,800 total collections 54600 64000 81000 199600 Accounts receivable = 91000*40%= 36400 2) Merchandise purchase budget April May June Quarter Budgeted cost of goods sold 45750 49500 68250 163500 31500 Add Desired ending inventory 39600 54600 25200 25,200 total needs 85350 104100 93450 188700 less beginning inventory 36,600 39,600 54,600 36,600 Required purchases 48,750 64,500 38,850 152,100 cost of goods sold = 75% of sales ending inventory = 80% of following months budgeted cost of goods sold 3) Schedule of Cash disbursements-Merchandise purhcase April May June Quarter March purchases 21,675 21,675 April purchases 24375 24,375 48750 May purchases 32250 32,250 64500 June purchases 19425 19425 total disbursements 46,050 56625 51675 154,350 Accounts payable june 30 = 19,425 4) Cash budget April May June Quarter Beginning cash balance 7,000 4,770 4,465 7,000 Add Cash collectiosn 54600 64000 81000 199600 total cas h available 61,600 68,770 85,465 206,600 less cash disbursements for inventory 46,050 56625 51675 154,350 for expenses 12780 13680 18180 44640 for equipment 1,000 0 0 1,000 total cash disbursements 59,830 70305 69855 199,990 Excess(Deficiency)of cash 1,770 -1,535 15,610 6,610 Financing: Borrowings 3,000 6,000 0 9,000 Repayments 0 -9,000 -9,000 interest 0 -210 -210 total financing 3,000 4465 -9210 -210 Ending cash balance 4,770 4,465 6400 6,400 interest = 3000*1%*3= 90 6000*1%*2= 120 5) income statement Sales 218000 cost of goods sold Beginning inventor 36,600 Add purchases 152,100 goods available for sale 188,700 ending inventory 25,200 163,500 Gross margin 54,500 Selling and administrative expense commissions 26160 rent 5400 Depreciation 2727 other expenses 13080 47367 net operating 7,133 interest expense 210 net income 6,923 Balance sheet Assets current assets Cash 6,400 Accounts receivable 36,400 inventory 25,200 total current assets 68,000 Building And equipment ,net (122200-2727) 119473 total Assets 187,473 liabilities And stockholder 's Equity Accounts payable 19,425 total current assets 19,425 Stockholder's Equity Capital stock 150,000 Retained earnings(11,125+6923) 18048 168,048 total liabilites & stockholders Equity 187,473

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