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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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: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.
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
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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