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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

Transcribed Image Text:The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
Current assets as of March 31:
Cash
24
7,900
%24
21,600
%24
42,000
$ 132,000
Accounts receivable
Inventory
Building and equipment, net
Accounts payable
24
25,050
$ 150,000
$ 28,450
Common stock
Retained earnings
a. The gross margin is 25% of sales.
b. Actual and budgeted sales data:
March (actual)
April
May
$ 54,000
$ 70,000
$ 75,000
$ 100,000
$ 51,000
June
July
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, $2,700 per month; other expenses (excluding depreciation), 6%
of sales. Assume that these expenses are paid monthly. Depreciation is $990 per month (includes depreciation on new assets).
g. Equipment costing $1,900 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.

Transcribed Image Text: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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Required 4
Required 5
Complete the schedule of expected cash collections.
Schedule of Expected Cash Collections
April
May
June
Quarter
Cash sales
$ 42,000
Credit sales
21,600
Total collections
$ 63,600 $
$
$
Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases.
Merchandise Purchases Budget
April
May
June
Quarter
Budgeted cost of goods sold
Add desired ending merchandise inventory
Total needs
Less beginning merchandise inventory
Required purchases
Budgeted cost of goods sold for April = $70,000 sales x 75% = $52,500.
Add desired ending inventory for April = $56,250 × 80% = $45,000.
$ 52,500 $56,250
45,000
97,500
56,250
42,000
$ 55,500 $56,250 $
%3!
Schedule of Expected Cash Disbursements-Merchandise Purchases
April
May
June
Quarter
March purchases
April purchases
May purchases
June purchases
Total disbursements
$ 25,050
$ 25,050
27,750
27,750
55,500
$ 52,800 $27,750 $
0 $ 80,550
%24
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