Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available Assets Deacon Company Balance Sheet March 31 Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 62,000 43,600 46,000 107,000 $258,600 $ 63,600 70,000 125,000 $ 258,600 Budgeted Income Statements April May June Sales $120,000 $130,000 $150,000 Cost of goods sold 72,000 78,000 90,000 Gross margin 48,000 52,000 60,000 Selling and administrative expenses, 24,900 26,400 29,400 Net operating income $ 23,100 $ 25,600 $ 30,600 Budgeting Assumptions: a. 60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale. b. Budgeted sales for July are $160,000. c. 10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. The accounts payable at March 31 will be paid in April. d. Each month's ending merchandise inventory should equal $10,000 plus 50% of the next month's cost of goods sold. e. Depreciation expense is $1,900 per month. All other selling and administrative expenses are paid in full in the Month the expense is incurred.