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

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The Following Data Relate To The Operations Of Shilow Company A Wholesale Distributor Of Consumer Goods Current Assets 1 (82.88 KiB) Viewed 6 times

The Following Data Relate To The Operations Of Shilow Company A Wholesale Distributor Of Consumer Goods Current Assets 2 (79.41 KiB) Viewed 6 times

The Following Data Relate To The Operations Of Shilow Company A Wholesale Distributor Of Consumer Goods Current Assets 3 (55.98 KiB) Viewed 6 times

The Following Data Relate To The Operations Of Shilow Company A Wholesale Distributor Of Consumer Goods Current Assets 4 (84.07 KiB) Viewed 6 times

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 Capital stock Retained earnings a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 9.400 $27,600 $ 51,000 $99,600 $30,675 150,000 $ $6.925 $69,000 $85.000 $90.000 $115.000 $66,000 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. Each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold. d. 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, $4,200 per month; other expenses (excluding depreciation). 6% of sales. Assume that these expenses are paid monthly. Depreciation is $747 per month (includes depreciation on new assets) g. Equipment costing $3.400 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
y. Luuling wus vo e parcio Tur 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 data above: 1. Complete the following schedule. Cash sales Credit sales Total collections Schedule of Expected Cash Collections April May June $ 51,000 27,600 $ 78,600 $ 0 $ Check Figure: Total Cash Collections for Quarter 2. Complete the following: Quarter 0 S 0 $ 271,600 Merchandise Purchases Budget April $63,750 May Budgeted cost of goods sold Add desired ending inventory 54,000 Total needs 117,750 Less beginning inventory 51,000 0 S Required purchases $ 66,750 $ 0 S Check Figure: Total Merchandise Purchases for Quarter June Quarter 0 $206,100 2
Budgeted cost of goods sold for April = $85,000 sales x 75% = $63,750. Add desired ending inventory for April = $67,500 x 80% = $54,000. Schedule of Expected Cash Disbursements-Merchandise Purchases May March purchases April purchases May purchases June purchases Total disbursements April $ 30,675 33,375 33,375 June Quarter $ 30,675 66,750 $ 64,050 $ 33,375 $ $ 97,425 Check Figure: Total Quarterly Cash Disbursements for Merchandise $ 208,350 0
3. Complete the following cash budget: (Borrow and repay in increments of $1,000. Cash deficiency, repayments and interest should be indicated by a minus sign.) Beginning cash balance. Add cash collections Total cash available Less cash disbursements: For inventory For expenses For equipment Total cash disbursements Excess (deficiency) of cash Financing: Borrowings Repayments Interest Total financing Ending cash balance $ $ EA Check Figure for April $ Shilow Company Cash Budget April 9,400 78,600 88,000 64,050 19,500 3,400 86,950 1,050 0 1,050 $ 4,050 May 0 0 0 0 0 $ June 0 0 0 0 0 $ Check Figure for Quarter $ EA Quarter 0 0 0 0 0 4,220 4