Question 5 (7 marks) The following is selected information relating to the operations of Shilow Company: Current Assets as of March 31, 2018 Cash Accounts receivable Inventory Capital assets, net Accounts payable Capital stock Retained earnings Gross Profit is 40% of Sales. Actual and budgeted sales data: $ 8,000 20,000 36,000 120,000 21,750 150,000 12,250 March (actual) $ 50,000 April 70,000 May 82,000 95,000 48,000 June July Sales are 70% for cash and 30% on credit. Credit terms are n/30, and therefore accounts are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. At the end of each month, inventory is to be on hand equal to 60% of the following month's cost of goods sold. One half of a month's inventory purchases are paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are a result of March purchases of inventory. Monthly expenses are as follows: salaries and wages, 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). Equipment costing $5,000 will be purchased for cash in April. 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; borrowing must be in multiples of $1,000. The interest rate is 12% per annum. Interest is paid only at the time of repayment of principal; figure interest on whole months (1/12, 2/12, and so forth).