Reference no: EM131812555
Problem - The following data relate to the operations of Seymour Company, a wholesale distributor of consumer goods:
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Current assets as of March 31:
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Cash
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$10,500
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Accounts receivable
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21,000
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Inventory
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10,080
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Buildings and equipment, net
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140,000
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Accounts payable
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36,500
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Capital stock
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40,000
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Retained earnings
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105,080
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(a) Gross margin is 30% of sales
(b) Actual and budgeted sales data:
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March (actual)
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$70,000
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April
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$72,000
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May
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$73,000
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June
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$84,000
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July
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$80,000
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(c) Sales are 70% for cash and 30% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are the result of March credit sales.
(d) Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold.
(e) 25% of a month's inventory purchases are paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable at March 31 are a result of March purchases of inventory.
(f) Monthly expenses are as follows: salaries and wages $12,500; rent, $3,600 per month; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $1,000 per month (includes depreciation on new assets).
(g) Equipment costing $9,000 will be purchased for cash in April.
(h) The company must maintain a minimum cash balance of $5,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month; borrowing must be in multiples of $1,000. The annual interest rate is 12%. Interest is paid only at the time of repayment of principal; figure interest on whole months (1/12, 2/12, and so forth).
Requirement 1: Complete the following schedule using the above data.
Schedule of Expected Cash Collections
Requirement 2: Complete the following using the above data.
Merchandise Purchases Budget
Schedule of Expected Cash Disbursements-Merchandise Purchases
Requirement 3: Complete the following using the above data.
Schedule of Expected Cash Disbursements-Selling and Administrative Expenses
Requirement 4: Complete the following cash budget using the above data.
Cash Budget
Requirement 5: Prepare an absorption costing income statement, for the quarter ended June 30.
Requirement 6: Prepare a balance sheet as of June 30.