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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: Cash Accounts receivable Inventory Building and equipment, net Accounts payable Capital stock Retained earnings $ $ $ $ $ $ $ B, 890 20,000 36,000 120,000 21,75e 150,00 12, 250 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $50,000 $60,000 $72,090 $90,000 $48,000 c Sales are 50% 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 purchasethe other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of Inventory 1. 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. 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 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 3. Complete the following cash budget (Cosh deficiency, repayments and interest should be Indicated by a minus sign.) Answer is not complete. June Shilow Company Cash Budget April May 8,000 56,000 67,200 64,000 87,200 s s Quarter 8.000 200,000 82,800 Beginning cash balance Add cash collections Total cash available Less cash disbursements: 82.800 214,000 58.500 15.480 53.550 18.700 47.850 13.300 1,500 62.650 1,350 150.000 47,460 1,500 73,080 (6.700) 72.250 10.550 208.860 5.140 For inventory For expenses For equipment Total cash disbursements Excess deficiency of cash Financing Borrowings Repayments Interest Total financing Ending cash balance 0 0 (6.700 230) X 230) 10.320 (230) (230) 4.910 1.350 19 4. Prepare an absorption costing income statement for the quarter ended June 30. Answer is complete but not entirely correct. Shilow Company Income Statement For the Quarter Ended June 30 Sales 222.000 Cost of goods sold: Beginning inventory Purchases Is 36,000 159,300 195,300 Goods available for sale (28,800) 166,500 55,500 Ending inventory Gross margin Selling and administrative expenses Commissions Rent 26.840 >> 7.500 2,700 Depreciation 13.320 Other expenses Net operating income Interest expense SIS 50.160 5.340 (230) 5.110 Net income 5. Prepare a balance sheet as of June 30. Answer is complete but not entirely correct. Shilow Company Balance Sheet June 30 Assets Current assets: Cash $ 4,910 X 36.000 Account receivable Inventory 28.800 Total current assets 69.710 118.800 188.510 IS Building and equipment-net Total assets Liabilities and Stockholders' Equity Account payable S 21.150 Stockholders equity: Common stock Retained earnings 150.000 17.300 X 167.380 S188.510 Total abilities and stockholders' equity