The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:...
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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: a. The gross margin is 25% of sales. b. Actual and budgeted sales data: Cash Accounts receivable Inventory $8,000 $20,000 $36,000 Building and equipment, net $120,000 Accounts payable Common stock Retained earnings $21,750 $150,000 $12,250 March (actual) $50,000 April $60,000 May $72,000 June $90,000 July $48,000 Page 397 - 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, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets). g. Equipment costing $1,500 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 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. 3. Complete the following cash budget: Cash Budget Beginning cash balance Page 398 April May June Quarter $ 8,000 56,000 64,000 Add cash collections Total cash available Less cash disbursements: For inventory For expenses For equipment Total cash disbursements Excess (deficiency) of cash Financing: Etc. 47,850 13,300 1,500 62,650 1,350 The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: a. The gross margin is 25% of sales. b. Actual and budgeted sales data: Cash Accounts receivable Inventory $8,000 $20,000 $36,000 Building and equipment, net $120,000 Accounts payable Common stock Retained earnings $21,750 $150,000 $12,250 March (actual) $50,000 April $60,000 May $72,000 June $90,000 July $48,000 Page 397 - 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, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets). g. Equipment costing $1,500 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 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. 3. Complete the following cash budget: Cash Budget Beginning cash balance Page 398 April May June Quarter $ 8,000 56,000 64,000 Add cash collections Total cash available Less cash disbursements: For inventory For expenses For equipment Total cash disbursements Excess (deficiency) of cash Financing: Etc. 47,850 13,300 1,500 62,650 1,350
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Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
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