Deacon Company is a merchandising company that is preparing a budget for the second quarter of the calendar year. The following information is available.

DEACON COMPANY Balance Sheet March 31

Assets Cash $ 59,000 Accounts receivable 44,000 Inventory 41,000 Plant and equipment, net of depreciation 110,000 Total assets $ 254,000

Liabilities and Shareholders Equity Accounts payable $ 51,000 Common shares 65,000 Retained earnings 138,000 Total liabilities and shareholders equity $ 254,000

Budgeted Income Statements April May June Sales $ 100,000 $ 111,000 $ 120,000 Cost of goods sold 60,000 66,600 72,000 Gross margin 40,000 44,400 48,000 Selling and administrative expenses 14,000 12,000 18,000 Operating income $ 26,000 $ 32,400 $ 30,000

Budgeting Assumptions: Sixty percent of sales are cash sales and 40 percent of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80 percent are collected in the month subsequent to the sale. Budgeted sales for July are $129,000. 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. Each months ending merchandise inventory should equal $10,000 plus 50% of the next months cost of goods sold. Depreciation expense is $1,400 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred. Required:

1. Calculate the expected cash collections for April, May, and June.

2. Calculate the budgeted merchandise purchases for April, May, and June.

3. Calculate the expected cash disbursements for merchandise purchases for April, May, and June.

4. Prepare a budgeted balance sheet at June 30. (Hint: You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30 balance sheet.)