The owner of American Goods, Inc. provides you the followingdata:
Current assets as of March 31:
Cash
$8,000
Accounts receivable
$20,000
Inventory
$36,000
Building and equipment, net
$120,000
Accounts payable
$21,750
Common stock
$150,000
Retained earnings
$12,250
The gross margin is 35% of sales. Thus, the cost of goods soldis 65% of sales. Actual and budgeted sales data:
Sales are 60% for cash and 40% on credit. Credit sales arecollected in the month following sale. The accounts receivable atMarch 31 are a result of March credit sales.
Each monthâs ending inventory should equal 80% of the followingmonthâs budgeted cost of goods sold.
Forty percent of a monthâs inventory purchases is paid for inthe month of purchase; the other sixty percent is paid for in thefollowing month. The accounts payable at March 31 are the result ofMarch purchases of inventory.
Monthly expenses are as follows: commissions, 10% of sales;rent, $2,500 per month; other expenses (excluding depreciation), 5%of sales. These expenses are paid monthly. Depreciation is $1,000per month (includes depreciation on new assets).
Equipment costing $3,500 will be purchased for cash inApril.
Management would like to maintain a minimum cash balance of atleast $5,000 at the end of each month. The company has an agreementwith a local bank that allows the company to borrow in incrementsof $1,000 at the beginning of each month, up to a total loanbalance of $20,000. The interest rate on these loans is 1% permonth and interest is not compounded. The company would, insofar asit is able to do so, repay any loans plus accumulated interest atthe end of the quarter.
March (actual)
$50,000
April
$60,000
May
$72,000
June
$90,000
July
$48,000
With formulas - Required: Show all calculations. Aspreadsheet workbook is highly recommended. If you usespreadsheets, attach the spreadsheet workbook to the examinationfile. Use the data above.
1. Create a cash budget for April, May, June and thequarter.
2. Prepare an income statement for the quarter ended June30.
3. Prepare a balance sheet as of June 30.
4. Determine the following for American Goods, Inc. as of June30:
a. Working Capital
b. Accounts Receivable Turnover
c. Inventory Turnover
d. Net Margin
e. Total Asset Turnover
The owner of American Goods, Inc. provides you the followingdata:
Current assets as of March 31: | |
Cash | $8,000 |
Accounts receivable | $20,000 |
Inventory | $36,000 |
Building and equipment, net | $120,000 |
Accounts payable | $21,750 |
Common stock | $150,000 |
Retained earnings | $12,250 |
The gross margin is 35% of sales. Thus, the cost of goods soldis 65% of sales. Actual and budgeted sales data:
Sales are 60% for cash and 40% on credit. Credit sales arecollected in the month following sale. The accounts receivable atMarch 31 are a result of March credit sales.
Each monthâs ending inventory should equal 80% of the followingmonthâs budgeted cost of goods sold.
Forty percent of a monthâs inventory purchases is paid for inthe month of purchase; the other sixty percent is paid for in thefollowing month. The accounts payable at March 31 are the result ofMarch purchases of inventory.
Monthly expenses are as follows: commissions, 10% of sales;rent, $2,500 per month; other expenses (excluding depreciation), 5%of sales. These expenses are paid monthly. Depreciation is $1,000per month (includes depreciation on new assets).
Equipment costing $3,500 will be purchased for cash inApril.
Management would like to maintain a minimum cash balance of atleast $5,000 at the end of each month. The company has an agreementwith a local bank that allows the company to borrow in incrementsof $1,000 at the beginning of each month, up to a total loanbalance of $20,000. The interest rate on these loans is 1% permonth and interest is not compounded. The company would, insofar asit is able to do so, repay any loans plus accumulated interest atthe end of the quarter.
March (actual) | $50,000 |
April | $60,000 |
May | $72,000 |
June | $90,000 |
July | $48,000 |
With formulas - Required: Show all calculations. Aspreadsheet workbook is highly recommended. If you usespreadsheets, attach the spreadsheet workbook to the examinationfile. Use the data above.
1. Create a cash budget for April, May, June and thequarter.
2. Prepare an income statement for the quarter ended June30.
3. Prepare a balance sheet as of June 30.
4. Determine the following for American Goods, Inc. as of June30:
a. Working Capital
b. Accounts Receivable Turnover
c. Inventory Turnover
d. Net Margin
e. Total Asset Turnover
Related questions
The owner of American Goods, Inc. provides you the followingdata:
Current assets as of March 31: | |
Cash | $8,000 |
Accounts receivable | $20,000 |
Inventory | $36,000 |
Building and equipment, net | $120,000 |
Accounts payable | $21,750 |
Common stock | $150,000 |
Retained earnings | $12,250 |
The gross margin is 35% of sales. Thus, the cost of goods soldis 65% of sales. Actual and budgeted sales data:
Sales are 60% for cash and 40% on credit. Credit sales arecollected in the month following sale. The accounts receivable atMarch 31 are a result of March credit sales.
Each monthâs ending inventory should equal 80% of the followingmonthâs budgeted cost of goods sold.
Forty percent of a monthâs inventory purchases is paid for inthe month of purchase; the other sixty percent is paid for in thefollowing month. The accounts payable at March 31 are the result ofMarch purchases of inventory.
Monthly expenses are as follows: commissions, 10% of sales;rent, $2,500 per month; other expenses (excluding depreciation), 5%of sales. These expenses are paid monthly. Depreciation is $1,000per month (includes depreciation on new assets).
Equipment costing $3,500 will be purchased for cash inApril.
Management would like to maintain a minimum cash balance of atleast $5,000 at the end of each month. The company has an agreementwith a local bank that allows the company to borrow in incrementsof $1,000 at the beginning of each month, up to a total loanbalance of $20,000. The interest rate on these loans is 1% permonth and interest is not compounded. The company would, insofar asit is able to do so, repay any loans plus accumulated interest atthe end of the quarter.
March (actual) | $50,000 |
April | $60,000 |
May | $72,000 |
June | $90,000 |
July | $48,000 |
With formulas - Required: Show all calculations. Aspreadsheet workbook is highly recommended. If you usespreadsheets, attach the spreadsheet workbook to the examinationfile. Use the data above.
1. Create a cash budget for April, May, June and thequarter.
2. Prepare an income statement for the quarter ended June30.
3. Prepare a balance sheet as of June 30.
4. Determine the following for American Goods, Inc. as of June30:
a. Working Capital
b. Accounts Receivable Turnover
c. Inventory Turnover
d. Net Margin
e. Total Asset Turnover
The following data relate to the operations of Shilow Company, awholesale distributor of consumer goods:
| Current assets as of March 31: | ||
| Cash | $ | 8,400 |
| Accountsreceivable | $ | 23,600 |
| Inventory | $ | 45,000 |
| Building andequipment, net | $ | 123,600 |
| Accountspayable | $ | 26,925 |
| Commonstock | $ | 150,000 |
| Retainedearnings | $ | 23,675 |
The gross margin is 25% of sales.
Actual and budgeted sales data:
| March(actual) | $ | 59,000 |
| April | $ | 75,000 |
| May | $ | 80,000 |
| June | $ | 105,000 |
| July | $ | 56,000 |
Sales are 60% for cash and 40% on credit. Credit sales arecollected in the month following sale. The accounts receivable atMarch 31 are a result of March credit sales.
Each monthâs ending inventory should equal 80% of the followingmonthâs budgeted cost of goods sold.
One-half of a monthâs inventory purchases is paid for in themonth of purchase; the other half is paid for in the followingmonth. The accounts payable at March 31 are the result of Marchpurchases of inventory.
Monthly expenses are as follows: commissions, 12% of sales;rent, $3,200 per month; other expenses (excluding depreciation), 6%of sales. Assume that these expenses are paid monthly. Depreciationis $927 per month (includes depreciation on new assets).
Equipment costing $2,400 will be purchased for cash inApril.
Management would like to maintain a minimum cash balance of atleast $4,000 at the end of each month. The company has an agreementwith a local bank that allows the company to borrow in incrementsof $1,000 at the beginning of each month, up to a total loanbalance of $20,000. The interest rate on these loans is 1% permonth and for simplicity we will assume that interest is notcompounded. The company would, as far as it is able, repay the loanplus accumulated interest at the end of the quarter.
Required:
Using the preceding data:
1. Complete the following schedule: schedule of expected cashcollections
2. Complete the following: merchandise purchases budget
3. Complete the following cash budget:
4. Prepare an absorption costing income statement for thequarter 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: |
| Current assets as of March 31: | ||
| Cash | $ | 7,200 |
| Accounts receivable | $ | 18,800 |
| Inventory | $ | 37,800 |
| Building and equipment, net | $ | 123,600 |
| Accounts payable | $ | 22,425 |
| Capital stock | $ | 150,000 |
| Retained earnings | $ | 14,975 |
| a. | The gross margin is 25% of sales. |
| b. | Actual and budgeted sales data: |
| March (actual) | $47,000 |
| April | $63,000 |
| May | $68,000 |
| June | $93,000 |
| July | $44,000 |
| 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 monthâs ending inventory should equal 80% of the following monthâs budgeted cost of goods sold. |
| e. One-half of a monthâs 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. | f. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,000 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $927 per month (includes depreciation on new assets). |
| g. | Equipment costing $1,200 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. |
5. Complete a balance sheet as of June 30
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