Company, a wholesale distributor:

Current assets as of March 31: Cash $ 36,000 Accounts receivable 48,000 Inventory 86,400 Plant and equipment, net 216,000 Accounts payable 70,400 Capital shares 290,000 Retained earnings 26,000

a. Gross margin is 25% of sales. b. Actual and budgeted sales data are as follows:

March (actual) $ 120,000 April 144,000 May 156,000 June 174,000 July 118,000

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. At the end of each month, inventory is to be on hand equal to 80% of the following months sales needs, stated at cost. e. One-half of a months inventory purchases are paid for in the month of purchase; the other half are 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% of sales; rent, $8,000 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $2,300 per month (includes depreciation on new assets).

g. Equipment costing $2,900 will be purchased for cash in April. h. The company must maintain a minimum cash balance of $9,000. 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).