Problem $8-29($Statlc$)$ Completing a Master Budget $[$LO$8-2,$ LO$8-4,$ LO$8-7,$ LO$8-8,$ LO&

$9,$ LO$8-10]$

The following data relate to the operations of Shilow Company. a wholesale distributor of consumer goods:

a$.$ The gross margin is $25\%$ of sales.

b$.$ Actual and budgeted sales data:

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.

Solve for the following $($please explain how you got there$)$

A$.$ Complete the cash budget.

B$.$ Prepare an absorption costing income statement for the quarter ended June $30.$

C Prepare a balance sheet as of June $30.\backslash$begin$\{$tabular$\}\{|$c$|$c$|$c$|$c$|$c$|$c$|$c$|$c$|\}$

$\backslash$hline $\backslash$multicolumn$\{8\}\{|$c$|\}\{$Shilow Company$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{8\}\{|$c$|\}\{$Cash Budget$\}\backslash \backslash$

$\backslash$hline & April & $\backslash$multicolumn$\{2\}\{|$c$|\}\{$May$\}$ & $\backslash$multicolumn$\{2\}\{|$c$|\}\{$June$\}$ & $\backslash$multicolumn$\{2\}\{|$l$|\}\{$Quarter$\}\backslash \backslash$

$\backslash$hline Beginning cash balance & $\backslash$$ $8,000$ & & & & & & $\backslash \backslash$

$\backslash$hline Add collections from customers & $56,000$ & & & & & & $\backslash \backslash$

$\backslash$hline Total cash available & $64,000$ & & $0$ & & $0$ & & $0\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{8\}\{|$l$|\}\{$Less cash disbursements:$\}\backslash \backslash$

$\backslash$hline For inventory & $47,850$ & & & & & & $\backslash \backslash$

$\backslash$hline For expenses & $13,300$ & & & & & & $\backslash \backslash$

$\backslash$hline For equipment & $1,500$ & & & & & & $\backslash \backslash$

$\backslash$hline Total cash disbursements & $62,650$ & & $0$ & & $0$ & & $0\backslash \backslash$

$\backslash$hline Excess $($deficiency$)$ of cash available over disbursements & $1,350$ & & $0$ & & $0$ & & $0\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{8\}\{|$l$|\}\{$Financing:$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{8\}\{|$l$|\}\{$Borrowings$\}\backslash \backslash$

$\backslash$hline Repayments & $0$ & & & & & & $\backslash \backslash$

$\backslash$hline Interest & $0$ & & & & & & $\backslash \backslash$

$\backslash$hline Total financing & $0$ & & $0$ & & $0$ & & $0\backslash \backslash$

$\backslash$hline Ending cash balance & $\backslash$$ $1,350$ & $\backslash$$ & $0$ & $\backslash$$ & $0$ & $\backslash$$ & $0\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}\backslash$begin$\{$tabular$\}\{|$c$|$c$|$c$|\}$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$Shilow Company$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$Income Statement$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$For the Quarter Ended June $30\}\backslash \backslash$

$\backslash$hline Sales & & $\backslash$$ $222,000\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$Cost of goods sold:$\}\backslash \backslash$

$\backslash$hline Beginning inventory & $36,000$ & $\backslash \backslash$

$\backslash$hline Purchases & & $\backslash \backslash$

$\backslash$hline Goods available for sale & $36,000$ & $\backslash \backslash$

$\backslash$hline Ending inventory & & $36,000\backslash \backslash$

$\backslash$hline Gross margin & & $186,000\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$Selling and administrative expenses:$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$Commissions$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$Rent$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$Depreciation$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$Other expenses$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{\backslash \%\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$P$\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{\backslash$begin$\{$tabular$\}\{|$l$|$l$|$l$|\}$

$\backslash$hline Net operating income $\backslash$& $\backslash$& $\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{3\}\{|$l$|\}\{$Interest expense$\}\backslash \backslash$

$\backslash$hline Net income & & $186,000\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$