The following data relate to the operations of Lim Corporation, a wholesale distributor of consumer goods: Current

Question:

The following data relate to the operations of Lim Corporation, a wholesale distributor of consumer goods:

Current assets as of December 31:

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,000

Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000

Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,800

Buildings and equipment, net. . . . . . . . . . . . . . . . . . . . . . 110,885

Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,550

Common shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000

Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,135

a. The gross margin is 30% of sales.

b. Actual and budgeted sales data are as follows:

December (actual). . . . . . . . . . . . . . . . . . . . . . $60,000

January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000

February. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000

March. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000

April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,000

c. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales.

d. Each month€™s ending inventory should equal 20% of the following month€™s budgeted cost of goods sold.

e. One-quarter of a month€™s inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory.

f. Monthly expenses are as follows: commissions, $12,000; rent, $1,800; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter.

g. Equipment will be acquired for cash: $3,000 in January and $8,000 in February.

h. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows it to borrow up to a total loan balance of $50,000. The interest rate on these loans is 0.5% per month, and interest payments must be made at the end of each month. Assume all borrowing occurs at the beginning of a month. The company will, as far as it is able, repay outstanding loans at the end of each month.

Required:

Using the data above, complete the following:

1. Schedule of expected cash collections:

January February March Quarter Cash sales.... Credit sales.. Total collections $28,000 36,000 $64000 ||

2. Merchandise purchases budget:

The following data relate to the operations of Lim Corporation,

Schedule of expected cash disbursements€”Merchandise purchases:

3. Schedule of expected cash disbursements€”Selling and administrative expenses:

4. Cash budget:

5. Prepare an absorption costing income statement, similar to the one shown in Schedule 9, for the quarter ended March 31.
6. Prepare a balance sheet as of March 31.

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =... Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...