Show me your Works!!! Problem 7-27A Completing a Master Budget [LO7-2, LO7-4, LO
ID: 2459780 • Letter: S
Question
Show me your Works!!!
Problem 7-27A Completing a Master Budget [LO7-2, LO7-4, LO7-7, LO7-8, LO7-9, LO7-10]
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.
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.
Monthly expenses are as follows: commissions, 12% of sales; rent, $3,000 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $963 per month (includes depreciation on new assets).
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.
3. Complete the following cash budget: (Borrow and repay in increments of $1,000. Cash deficiency, repayments and interest should be indicated by a minus sign.)
4. Prepare an absorption costing income statement for the quarter ended June 30.
5. prepare a balance sheet as of June 30.
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:Explanation / Answer
3. Complete the following cash budget: (Borrow and repay in increments of $1,000. Cash deficiency, repayments and interest should be indicated by a minus sign.)
4. Prepare an absorption costing income statement for the quarter ended June 30.
prepare a balance sheet as of June 30.
Workings
April May June Cash balance, beginning 8,200 4,410 4,745 Add cash collections 66,600 76,000 93,000 Total cash available 74,800 80,410 97,745 Less cash disbursements: For inventory 55,050 65,625 60,675 For expenses 16,140 17,040 21,540 For equipment 2200 0 Total cash disbursements 73,390 82,665 82,215 Excess (deficiency) of cash 1,410 -2,255 15,530 Borrowing 3,000 7000 0 Repayments 10000 Interest Paid 230 Total Financing 3,000 7,000 0 Cash Balance, Ending 4,410 4,745 5,300