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Question: The following data relate to the operations

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash .................................................... $8,000 Accounts receivable ......................... $20,000 Inventory .......................................... $36,000 Building and equipment, net ......... $120,000 Accounts payable .............................. $21,750 Capital stock ................................... $150,000 Retained earnings ............................. $12,250 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) ................................... $50,000 April .................................................... $60,000 May .................................................... $72,000 June ................................................... $90,000 July .................................................... $48,000 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, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. depreciation is $900 per month (includes depreciation on new assets). g. Equipment costing $1,500 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 following schedule:
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash .................................................... $8,000 Accounts receivable ......................... $20,000 Inventory .......................................... $36,000 Building and equipment, net ......... $120,000 Accounts payable .............................. $21,750 Capital stock ................................... $150,000 Retained earnings ............................. $12,250 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) ................................... $50,000 April .................................................... $60,000 May .................................................... $72,000 June ................................................... $90,000 July .................................................... $48,000 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, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. depreciation is $900 per month (includes depreciation on new assets). g. Equipment costing $1,500 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 following schedule: 2. Complete the following: 3. Complete the following: 4. Complete the following cash budget: 5. Prepare an absorption costing income statement, similar to the one shown in Schedule 9 in the chapter, for the quarter ended June 30. 6. Prepare a balance sheet as of June 30.
2. Complete the following:
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash .................................................... $8,000 Accounts receivable ......................... $20,000 Inventory .......................................... $36,000 Building and equipment, net ......... $120,000 Accounts payable .............................. $21,750 Capital stock ................................... $150,000 Retained earnings ............................. $12,250 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) ................................... $50,000 April .................................................... $60,000 May .................................................... $72,000 June ................................................... $90,000 July .................................................... $48,000 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, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. depreciation is $900 per month (includes depreciation on new assets). g. Equipment costing $1,500 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 following schedule: 2. Complete the following: 3. Complete the following: 4. Complete the following cash budget: 5. Prepare an absorption costing income statement, similar to the one shown in Schedule 9 in the chapter, for the quarter ended June 30. 6. Prepare a balance sheet as of June 30.
3. Complete the following:
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash .................................................... $8,000 Accounts receivable ......................... $20,000 Inventory .......................................... $36,000 Building and equipment, net ......... $120,000 Accounts payable .............................. $21,750 Capital stock ................................... $150,000 Retained earnings ............................. $12,250 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) ................................... $50,000 April .................................................... $60,000 May .................................................... $72,000 June ................................................... $90,000 July .................................................... $48,000 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, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. depreciation is $900 per month (includes depreciation on new assets). g. Equipment costing $1,500 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 following schedule: 2. Complete the following: 3. Complete the following: 4. Complete the following cash budget: 5. Prepare an absorption costing income statement, similar to the one shown in Schedule 9 in the chapter, for the quarter ended June 30. 6. Prepare a balance sheet as of June 30.
4. Complete the following cash budget:
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash .................................................... $8,000 Accounts receivable ......................... $20,000 Inventory .......................................... $36,000 Building and equipment, net ......... $120,000 Accounts payable .............................. $21,750 Capital stock ................................... $150,000 Retained earnings ............................. $12,250 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) ................................... $50,000 April .................................................... $60,000 May .................................................... $72,000 June ................................................... $90,000 July .................................................... $48,000 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, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. depreciation is $900 per month (includes depreciation on new assets). g. Equipment costing $1,500 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 following schedule: 2. Complete the following: 3. Complete the following: 4. Complete the following cash budget: 5. Prepare an absorption costing income statement, similar to the one shown in Schedule 9 in the chapter, for the quarter ended June 30. 6. Prepare a balance sheet as of June 30.
5. Prepare an absorption costing income statement, similar to the one shown in Schedule 9 in the chapter, for the quarter ended June 30. 6. Prepare a balance sheet as of June 30.





Transcribed Image Text:

Schedule of Expected Cash Collections April May June Quarter Cash sales Credit sales. $36,000 20,000 Total collections $56,000 || Merchandise Purchases Budget April May June Quarter Budgeted cost of goods sold.. Add desired ending inventory. $45,000* 43,200t $54,000 Total needs. 88,200 36,000 Less beginning inventory . Required purchases. $52,200 *For April sales: $60,000 sales x 75% cost ratio = $45,000. t$54,000 x 80% = $43,200. Schedule of Expected Cash Disbursements-Merchandise Purchases April May June Quarter March purchases April purchases.. May purchases June purchases $21,750 $21,750 26,100 $26,100 52,200 Total disbursements $47,850 Schedule of Expected Cash Disbursements-Selling and Administrative Expenses April May June Quarter Commissions. $ 7,200 Rent.. 2,500 3,600 Other expenses Total disbursements $13,300 Cash Budget April May June Quarter Cash balance, beginning. $ 8,000 Add cash collections 56,000 Total cash available. 64,000 Less cash disbursements: For inventory For expenses For equipment 47,850 13,300 1,500 Total cash disbursements 62,650 Excess (deficiency) of cash Financing: 1,350 Etc. ||

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