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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 $8,000 Accounts receivable $20,000 Inventory $36,000 Buildings and equipment, net $120,000 Accounts payable $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% 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 will be acquired for cash : $ 1500 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 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 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. Requirement 1:Complete the following schedule using the above data. Schedule of Expected Cash Collections April May June Quarter Cash sales $36,600 Credit sales 20,000 Total collections $56,000 Requirement 2: Complete the following using the below data. Merchandise Purchases Budget April May June Quarter Budgeted cost of goods sold $45,000 Add desired ending inventory 43,200 Total needs 88,200 Less beginning inventory 36,000 Required purchases $52,200 $60,000 sales * 75 % $54,000 * 80% Schedule of Expected Cash Disbursements - Merchandise Purchases April May June Quarter March purchases $21,750 $21,750 April purchases 26,100 26,100 52,200 May purchases June purchases Total disbursements 47, 850 Requirement 3: Complete the following Cash Budget April May June Quarter Cash Balance beginning $ 8000 Add Cash collections 56,000 Total cash available 64,000 Less Cash disbursements For inventory 47,850 For expenses 13,300 For equipment 1,500 Total disbursements 62,650 Excess (deficiency) of cash $1,350 Financing Etc Requirement 4: Prepare an absorption costing Income Statement , similar to the one shown in schedule 9, for the quarter ended June,30 Requirement 5: Prepare a balance sheet as of June ,30

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