Question

The following data relate to the operations of Soper Company, a wholesale distributor of consumer goods, as of March 31:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,000
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . 20,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000
Building and equipment, net . . . . . . . . . . . . . . 120,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 21,750
Common shares . . . . . . . . . . . . . . . . . . . . . . . 150,000
Retained earnings. . . . . . . . . . . . . . . . . . . . . . 12,250
The gross margin is 25% of sales.
b. Actual and budgeted sales data are as follows:
March (actual) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,000
April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
May. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,000
June. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
July. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000
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.
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 that 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. 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 a month. The monthly interest rate is 1%. Interest must be paid at the end of each month based on the total loans outstanding for that month.
Required:
Using the data above, complete the following:
1. Schedule of expected cash collections:
2. Merchandise purchases budget:
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 June 30.
6. Prepare a balance sheet as of June 30.


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  • CreatedJuly 08, 2015
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