The following data relate to the operations of PicanuyCorporation, a wholesale distributor of consumer goods:
Current assets as ofDecember 31: Cash $ 6,500 Accounts receivable $ 38,040 Inventory $ 10,850 Buildings andequipment, net $ 115,600 Accountspayable $ 32,740 Capital stock $ 100,000 Retainedearnings $ 38,250
a. The gross margin is 30% ofsales. (In other words, cost of goods sold is 70% of sales.) b. Actual and budgeted sales dataare as follows:
December(actual) $63,400 January $77,500 February $80,300 March $91,000 April $58,800
c. Sales are 40% for cash and 60% on credit. Credit sales arecollected in the month following sale. The accounts receivable atDecember 31 are the result of December credit sales.
d. Each monthâs ending inventoryshould equal 20% of the following monthâs budgeted cost of goodssold. e. One-quarter of a monthâs inventory purchases is paid for in themonth of purchase; the other three-quarters is paid for in thefollowing month. The accounts payable at December 31 are the resultof December purchases of inventory.
f. Monthly expenses are as follows: commissions, $11,640; rent,$1,900; other expenses (excluding depreciation), 8% of sales.Assume that these expenses are paid monthly. Depreciation is $5,430for the quarter and includes depreciation on new assets acquiredduring the quarter.
g. Equipment will be acquired forcash: $6,800 in January and $8,500 in February. h. Management would like to maintain a minimum cash balance of$5,000 at the end of each month. The company has an agreement witha local bank that allows the company to borrow in increments of$1,000 at the beginning of each month, up to a total loan balanceof $50,000. The interest rate on these loans is 1% per month, andfor simplicity, we will assume that interest is not compounded. Thecompany would, as far as it is able, repay the loan plusaccumulated interest at the end of the quarter.
1. Compute the following schedule
Schedule of Expected Cash Collections January February March Quarter Cashsales $31,000 Creditsales 38,040 46,500 48,180 132,720 Total collections $69,040 $46,500 $48,180 $132,720
Complete the following:
Merchandise Purchases Budget January February March Quarter Budgetedcost of goods sold $54,250 $56,210 $63,700 $174,160 Adddesired ending inventory 11,242 12,740 8,232 8,232 Totalneeds 65,492 68,950 71,932 182,392 Lessbeginning inventory 10,850 11,242 12,740 10,850 Required purchases $54,642 $57,708 $59,192 $171,542
Budgeted cost of goods sold forJanuary = $77,500 sales à 70% = $54,250. Add desired ending inventory for January = $80,300 à 70% à 20% =$11,242.
Schedule of Expected Cash DisbursementsâMerchandise Purchases January February March Quarter Decemberpurchases $32,740.00 $32,740.00 Januarypurchases $13,660.50 $40,981.50 $54,642.00 Februarypurchases $57,708.00 Marchpurchases Total disbursements $46,400.50 $40,981.50 $0.00 $145,090.00
3. Compute the following schedule
Schedule of Expected Cash DisbursementsâSelling and AdministrativeExpenses January February March Quarter Commissions $11,640 $11,640 $11,640 $34,920 Rent 1,900 1,900 1,900 5,700 Otherexpenses 6,200 Total disbursements $19,740 $13,540 $13,540 $40,620
4.
Complete the following cash budget: (Borrow and repay inincrements of $1,000. Cash deficiency, repayments and interestshould be indicated by a minus sign. Round your answers to 2decimal places.)
Picanuy Corporation Cash Budget January February March Quarter Cashbalance, beginning 6,500.00 6,500.00 Add cashcollections 69,040.00 Totalcash available 75,540.00 0.00 0.00 6,500.00 Less cashdisbursements: Forinventory 46,400.50 Foroperating expenses 19,740.00 Forequipment 6,800.00 8,500.00 Totaldisbursements 72,940.50 8,500.00 0.00 0.00 Excess(deficiency) of cash 2,599.50 (8,500.00) 0.00 6,500.00 Financing: Borrowings $5,000.00 Repayments Interest Totalfinancing $0.00 $5,000.00 $0.00 $0.00 Cashbalance, ending $2,599.50 $(3,500.00) $0.00 $6,500.00
5. Prepare an absorption costing income statement for the quarterended March 31.
Picanuy Corporation Income Statement For the Quarter Ended March 31 Sales $248,800 Cost ofgoods sold: Beginning inventory $10,850 Purchases Goods available for sale 10,850 Ending inventory 10,850 Gross margin 237,950 Sellingand administrative expenses: Commissions Rent 5,700 Depreciation 5,430 Other expenses 11,130 Net operating income (loss) 226,820 Interest expense Net income (loss) 226,820
6. Prepare a balance sheet as of March 31.
Picanuy Corporation Balance Sheet March 31 Assets Currentassets: Cash Account receivable 54,600 Inventory Totalcurrent assets 54,600 Fixed assets-net Totalassets $54,600 Liabilities andStockholdersâ Equity Account payable Bank loan payable Stockholders' equity: Capital stock Retained earnings 0 Totalliabilities and stockholdersâ equity $0
The following data relate to the operations of PicanuyCorporation, a wholesale distributor of consumer goods: |
| Current assets as ofDecember 31: | ||
| Cash | $ | 6,500 |
| Accounts receivable | $ | 38,040 |
| Inventory | $ | 10,850 |
| Buildings andequipment, net | $ | 115,600 |
| Accountspayable | $ | 32,740 |
| Capital stock | $ | 100,000 |
| Retainedearnings | $ | 38,250 |
| a. | The gross margin is 30% ofsales. (In other words, cost of goods sold is 70% of sales.) |
| b. | Actual and budgeted sales dataare as follows: |
| December(actual) | $63,400 |
| January | $77,500 |
| February | $80,300 |
| March | $91,000 |
| April | $58,800 |
| c. | Sales are 40% for cash and 60% on credit. Credit sales arecollected in the month following sale. The accounts receivable atDecember 31 are the result of December credit sales. |
| d. | Each monthâs ending inventoryshould equal 20% of the following monthâs budgeted cost of goodssold. |
| e. | One-quarter of a monthâs inventory purchases is paid for in themonth of purchase; the other three-quarters is paid for in thefollowing month. The accounts payable at December 31 are the resultof December purchases of inventory. |
| f. | Monthly expenses are as follows: commissions, $11,640; rent,$1,900; other expenses (excluding depreciation), 8% of sales.Assume that these expenses are paid monthly. Depreciation is $5,430for the quarter and includes depreciation on new assets acquiredduring the quarter. |
| g. | Equipment will be acquired forcash: $6,800 in January and $8,500 in February. |
| h. | Management would like to maintain a minimum cash balance of$5,000 at the end of each month. The company has an agreement witha local bank that allows the company to borrow in increments of$1,000 at the beginning of each month, up to a total loan balanceof $50,000. The interest rate on these loans is 1% per month, andfor simplicity, we will assume that interest is not compounded. Thecompany would, as far as it is able, repay the loan plusaccumulated interest at the end of the quarter. |
1. Compute the following schedule
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| Complete the following:
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| 6. | Prepare a balance sheet as of March 31.
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Related questions
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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