The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 8,600 Accounts receivable $ 24,400 Inventory $ 46,200 Building and equipment, net $ 118,800 Accounts payable $ 27,675 Common stock $ 150,000 Retained earnings $ 20,325 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 61,000 April $ 77,000 May $ 82,000 June $ 107,000 July $ 58,000 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. Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold. 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. Monthly expenses are as follows: commissions, 12% of sales; rent, $3,400 per month; other expenses (excluding depreciation), 6% of sales. Assume these expenses are paid monthly. Depreciation is $891 per month (includes depreciation on new assets). Equipment costing $2,600 will be purchased for cash in April. 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 allowing it 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 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: Complete the schedule of expected cash collections. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases. Complete the 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 $ 8,600 Accounts receivable $ 24,400 Inventory $ 46,200 Building and equipment, net $ 118,800 Accounts payable $ 27,675 Common stock $ 150,000 Retained earnings $ 20,325 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 61,000 April $ 77,000 May $ 82,000 June $ 107,000 July $ 58,000 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. Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold. 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. Monthly expenses are as follows: commissions, 12% of sales; rent, $3,400 per month; other expenses (excluding depreciation), 6% of sales. Assume these expenses are paid monthly. Depreciation is $891 per month (includes depreciation on new assets). Equipment costing $2,600 will be purchased for cash in April. 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 allowing it 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 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: Complete the schedule of expected cash collections. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases. Complete the cash budget.

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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Question

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

Current assets as of March 31:
Cash	$ 8,600
Accounts receivable	$ 24,400
Inventory	$ 46,200
Building and equipment, net	$ 118,800
Accounts payable	$ 27,675
Common stock	$ 150,000
Retained earnings	$ 20,325

The gross margin is 25% of sales.
Actual and budgeted sales data:

March (actual) $ 61,000

April $ 77,000

May $ 82,000

June $ 107,000

July $ 58,000
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.
Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.
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.
Monthly expenses are as follows: commissions, 12% of sales; rent, $3,400 per month; other expenses (excluding depreciation), 6% of sales. Assume these expenses are paid monthly. Depreciation is $891 per month (includes depreciation on new assets).
Equipment costing $2,600 will be purchased for cash in April.
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 allowing it 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 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.

March (actual)	$ 61,000
April	$ 77,000
May	$ 82,000
June	$ 107,000
July	$ 58,000

Required:

Using the preceding data:

Complete the schedule of expected cash collections.
Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases.
Complete the cash budget.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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