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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.

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.

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 Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 65,000 $ 81,000 $ 86,000 $ 111,000 $ 62,000 $ 9,000 $ 26,000 $ 48,600 $ 109,200 $ 29,175 $ 150,000 $ 13,625 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, $3,800 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $819 per month (includes depreciation on new assets). g. Equipment costing $3,000 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 cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Beginning cash balance Add collections from customers Total cash available Less cash disbursements: For inventory Shilow Company Cash Budget April May June Quarter $ 9,000 $ 4,170 $ 4,165 $ 9,000 74,600 83,600 84,000 100,400 259,000 88,170 104,565 268,000 61,050 71,325 66,300 198,675 For expenses 18,380 19,280 23,780 61,440 For equipment 3,000 0 0 3,000 Total cash disbursements 82,430 90,605 90,080 263,115 Excess (deficiency) of cash available over disbursements 1,170 (2,435) 14,485 4,885 Financing: Borrowings Repayments Interest Total financing Ending cash balance 3,000 7,000 (10,230) (10,230) 0 0 (10,000) (10,000) 0 0 (230) (230) 3,000 7,000 (20,460) (20,460) $ 4,170 $ 4,565 $ (5,975) $ (15,575) < Required 2 Required 4 >
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 Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 65,000 $ 81,000 $ 86,000 $ 111,000 $ 62,000 $ 9,000 $ 26,000 $ 48,600 $ 109,200 $ 29,175 $ 150,000 $ 13,625 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, $3,800 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $819 per month (includes depreciation on new assets). g. Equipment costing $3,000 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 cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Beginning cash balance Add collections from customers Total cash available Less cash disbursements: For inventory Shilow Company Cash Budget April May June Quarter $ 9,000 $ 4,170 $ 4,165 $ 9,000 74,600 83,600 84,000 100,400 259,000 88,170 104,565 268,000 61,050 71,325 66,300 198,675 For expenses 18,380 19,280 23,780 61,440 For equipment 3,000 0 0 3,000 Total cash disbursements 82,430 90,605 90,080 263,115 Excess (deficiency) of cash available over disbursements 1,170 (2,435) 14,485 4,885 Financing: Borrowings Repayments Interest Total financing Ending cash balance 3,000 7,000 (10,230) (10,230) 0 0 (10,000) (10,000) 0 0 (230) (230) 3,000 7,000 (20,460) (20,460) $ 4,170 $ 4,565 $ (5,975) $ (15,575) < Required 2 Required 4 >
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