Question

a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 60,000 $ 76,000 $ 81,000 $106,000 $ 57,000 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 1. Monthly expenses are as follows: commissions, 12% of sales, rent, $3,300 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly Depreciation is $909 per month (includes depreciation on new assets). 9. Equipment costing $2,500 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 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 able at Martonows.coms are paid at these en be purchanimum Required: Ung the preceding data: 1. Complete the schedule of expected cash collections 2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases. 3. Complete the cash budget 4. Prepare an absorption costing income statement for the quarter ended June 30 5. Prepare a balance sheet as of June 30. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5

Answer 1

Schedule of Expected Cash Collections
	April	May	June	Quarter
Cash Sales (60%)	$              45,600	$              48,600	$            63,600	$       157,800
Credit Sales	$              24,000	$              30,400	$            32,400	$          86,800
Total Cash Collections	$              69,600	$              79,000	$            96,000	$       244,600
Merchandise Purchase Budget
	April	May	June	Quarter
Cost of Goods Sold	$              57,000	$              60,750	$            79,500	$       197,250
Add : Desired Ending Inventory	$              48,600	$              63,600	$            34,200	$          34,200
Total Needs	$            105,600	$           124,350	$         113,700	$       231,450
Less Beginning Inventory	$              45,600	$              48,600	$            63,600	$          45,600
Merchandise Purchase	$              60,000	$              75,750	$            50,100	$       185,850
Cash Disbursements
	April	May	June	Quarter
March Purchases	$              27,300			$          27,300
April Purchases	$              30,000	$              30,000		$          60,000
May Purchases		$              37,875	$            37,875	$          75,750
June Purchases			$            25,050	$          25,050
Total Cash Disbursements	$              57,300	$              67,875	$            62,925	$       188,100
Cash Budget
	April	May	June	Quarter
Beginning Cash	$                8,500	$                4,320	$              4,565	$            8,500
Total Cash Collections	$              69,600	$              79,000	$            96,000	$       244,600
Total Cash Available	$              78,100	$              83,320	$         100,565	$       253,100
Deduct : Disbursements
For Merchandise purchase	$              57,300	$              67,875	$            62,925	$       188,100
For Expenses	$              16,980	$              17,880	$            22,380	$          57,240
For Equipment	$                2,500			$            2,500
Total Disbursements	$              76,780	$              85,755	$            85,305	$       247,840
Excess (Deficiency) of cash	$                1,320	$              -2,435	$            15,260	$            5,260
Financing
Borrowing	$                3,000	$                7,000		$          10,000
Interest			$                -230	$              -230
Repayment			$          -10,000	$        -10,000
Total Financing	$                3,000	$                7,000	$          -10,230	$              -230
Ending Balance	$                4,320	$                4,565	$              5,030	$            5,030

Income Statement
Sales Revenue		$           263,000
Cost of Goods Sold
Beginning Inventory	$              45,600
Add Purchases	$            185,850
Cost of Goods available for sale	$            231,450
Less Ending Inventory	$              34,200
Cost of Goods Sold		$           197,250
Gross Profit		$              65,750
Selling and administrative expenses
Comission	$              31,560		=263000*12%
Rent	$                9,900		=3300*3
Other Expenses	$              15,780		=263000*6%
Interest Expense	$                    230
Depreciation	$                2,727		=909*3
Total Selling and administrative expenses		$              60,197
Net Income		$                5,553

Balance Sheet
Assets
Current Assets
Cash	$                5,030
Accounts Receivable	$              42,400		=106000*40%
Inventory	$              34,200
Total Current Assets		$              81,630
Building and Equipment, net of depreciation		$           120,973
Total Assets		$           202,603
Liabilities
Current Liabilities
Accounts Payable	$              25,050		=50100*50%
Total Current Liabilities		$              25,050
Stockholder's Equity
Common Stock	$            150,000
Retained Earnings	$              27,553		=22000+5553
Total Stockholder's Equity		$           177,553
Total Liabilities & Stockholder's Equity		$           202,603