All of Fusion's sales are on account. Due to strict credit policies, the company has no bad deot expense. The following collection performance is anticipated for the temainder of the year.

Percent collected in month of sale 40%

Percent collected in month following sale 50%

Percent collected in the second month following sale 10%

Fusion's normally pays for 75 percent of its purchases in the month that the purchases are made. The remaining amount is paid in the io owing month.: The company s fixed selling and administrative expenses average $10.000 per Menth. Of this amount, $3,000 is depreciation expense. Variable selling and administrative expenses are budgeted at 5 percent of sales. The company pays all of its selling and administrative expenses in the month that they are incurred.

Fusion's debt service is S4,000 per month. Of this amount, approximately $3.000 represents interest expense, and $1,000 is payment on the principal. The company's lax rate is approximately 25 percent. Quarterly tax payments are made at the end of March, June, September, and December.

A. Prepare Fusion's budgeted income statement for May.

b. Prepare Fusion's cash budget for May. Assume that the company's cash balance on May 1 is $30,000.