The following data relate to the operations of Miken Comapny, a distributor of consumer goods. Accounts as
Question:
The following data relate to the operations of Miken Comapny, a distributor of consumer goods.
Accounts as of March 31:
Cash ........... $8,000
A/R ........... $20,000
Inventory ........ $36,000
Building & Equip (net) .. $120,000
A/P ........... $21,750
Capital stock ...... $150,000
Retained Earnings ...... $12,250
A. The gross margin is 25% of sales
B. Actual and budgeted sales data:
March (actual) .... $50,000
April ........ $60,000
May ......... $72,000
June ......... $90,000
July .......... $48,000
C. Sales are 60% cash and 40% credit. Credit sales are collected in the month following sale. The A/R 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 COGS.
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 A/P 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 that these expenses are paid monthly. Depreciation is $900 per month.
G. Equipment costing $1,500 will be purchased for cash in April
H. The company must maintain a minimum cash balance of $4,000. An open line of credit is available at a local bank.
All borrowing is done at the beginning of a month, and all repayments are made at the end of the month; borrowing must be in multiples of $1,000. The annual interest rate is 12%. Interest is paid only at the time of repayment of principal.
Using this information complete the following schedules:
1. Schedules of expected cash collections
2. Merchandise purchase budget
3. Schedule of cash disbursements (merchandise)
4. Schedule of cash disbursements (operating expenses)
5. Cash budget
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 =... Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...
Step by Step Answer:
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer