1 answer

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...

Question:

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as o

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 Common stock Retained earnings $ 7,200 $ 18,800 $ 37,800 $ 123,600 $ 22,425 $ 150,000 $ 14,975 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ $ $ $ $ 47,000 63,000 68,000 93,000 44,000 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 in the following month. The accounts payable at March 31 are the result of March purchases of inventory. f. Monthly expenses are as follows: commissions, 12% of sales, rent, $2,000 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $927 per month (includes depreciation on new assets). g. Equipment costing $1,200 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 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 schedule of expected cash collections. 2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases. 3. Complete the cash budget. 4. Prepare an absorption costing income statement for the quarter ended June 30. 5. Prepare a balance sheet as of June 30.

Answers

1)Schedule of Cash Receipt Schedule of Expected Cash Collections April Quarter May June Cash Sale Credit Sale Total 37,800 55

Schedule of Expected Cash Disbursement - Merchandise Purchases April Quarter May June March Purchases 22,425 22,425 April May

Required 3) Shilow Company Cash Budget May 7,200 56,600 Quarter April June Beginning Cash Balance Add: Collections from custo

Working Notes: Calculation of Expenses April May June Quarter 224,000 Sale (a) 68,000 93,000 63,000 Expenses: Commissions (a

Required 4) Shilow Company Income Statement For the Quarter Ended June 30 Sales Cost of goods sold Beginning Inventory Add: P

Required 5) Shilow Company Balance Sheet June 30 Assets Current Assets: Cash Accounts receivable Inventory 6,220 37,200 26,40

Working Notes: Value of Equipment as on June 30: Balance as on March 31 Add: Equipment purchases Less: Depreciation 123,600 1

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