a.	As of December 31 (the end of the prior quarter), the companys balance sheet showed the following account balances:

Cash

$

13,100

Accounts receivable

55,800

Inventory

18,620

Buildings and equipment (net)

135,000

Accounts payable

$

47,000

Common stock

115,000

Retained earnings

60,520

$

222,520

$

222,520

b.	Actual and budgeted sales are as follows:

December(actual)

$ 93,000

January

$ 133,000

February

$ 194,000

March

$ 102,000

April

$ 100,000

c. Sales are 40% for cash and 60% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at December 31 are a result of December credit sales. d. The company's gross margin percentage is 30% of sales. (In other words, cost of goods sold is 70% of sales.) e. Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold. f. One-quarter of a month's inventory purchases is paid for in the month of purchase; the other three- quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. g. Monthly expenses are as follows: commissions, $27,500; rent, $4,150; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $4,050 for the quarter and includes depreciation on new assets acquired during the quarter. h. Equipment will be acquired for cash: $5,330 in January and $9,600 in February. i. Management would like to maintain a minimum cash balance of $7,000 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 $50,000. 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.

1.

Schedule of expected cash collections:

2. Merchandise Purchases Budget
	January	February	March	Quarter - Total
Budgeted cost of goods sold	$93,100	$135,800
Add: desired ending inventory	27,160
Total needs
Less: beginning inventory	18,620
Required purchases

3.Schedule of Cash Disbursements for Purchases

4. Schedule of Cash Disbursements for Selling and Administrative Expenses
	January
Commissions	$27,500
Rent	4,150
Other expenses	10,640
Total cash disbursements for selling and administrative expenses	$42,290

7.Balance Sheet
March 31
Assets
Current assets:
Cash
Accounts receivable
Inventory
Buildings and equipment, net
Total current assets
Depreciation expense
Total assets
Accounts payable
Bank loan payable
Stockholders' equity:
Common stock
Retained earnings
Total liabilities and stockholders equity

6.Income Statement
For the Quarter Ended March 31
Sales
Cost of goods sold:
Beginning inventory
Purchases
Ending inventory
Depreciation
Gross margin
Selling and administrative expenses:
Commissions
Rent
Other expenses
Depreciation
Net operating income
Interest expense
Net income(loss)