Answer Happy

Problem 8-29 REV (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] 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 $ 67,000 $ 83,000 $ 88,000 $113,000 $ 64,000 $ 9,200 $ 26,800 $ 49,800 $ 104,400 $ 29,925 $ 150,000 $ 10,275 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, $4,000 per month; other expenses (excluding depreciation), 6%
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, $4,000 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $783 per month (includes depreciation on new assets). g. Equipment costing $3,200 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.
Required 1 Required 2 Required 3 Complete the schedule of expected cash collections. Schedule of Expected Cash Collections May June Cash sales Credit sales Total collections April $49,800 26,800 $76,600 $ 0 Quarter 0 $
Skipped eBook Print References Required 1 Required 2 Required 3 Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchanc Merchandise Purchases Budget April May Budgeted cost of goods fold $62,250 $66,000 Add desired ending merchandise inventory 52,800 Total needs 115,050 49,800 Less beginning merchandise inventory Required purchases $ 65,250 $66,000 $ Budgeted cost of goods sold for April = $83,000 sales x 75% = $62,250. Add desired ending inventory for April = $66,000 x 80% = $52,800. March purchases April purchases May purchases June purchases Total disbursements 66,000 April $29,925 Schedule of Expected Cash Disbursements-Merchandise Purchases June May 32,625 32,625 June $62,550 $32,625 $ 0 0 Quarter 0 $ 95,175 0 Quarter $ 29,925 65,250
kloped Book Print G ferences Beginning cash balance Add collections from customers Total cash available Less cash disbursements: For inventory For expenses For equipment Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total financing Ending cash balance Shllow Company Cash Budget April $ 9,200 76,600 85,800 62,550 18,940 3,200 84,690 1,110 0 $ 1,110 S May 0 0 0 0 June 0 0 0 Quarter 0 0