Following are the budgeted income statements for the second quarter of 2016 for SeaTech, Inc.:

	April				May				June
Sales	$	224,000			$	272,000			$	304,000
Cost of goods sold*		153,600				182,400				201,600
Gross profit	$	70,400			$	89,600			$	102,400
Operating expenses		35,200				40,000				43,200
Operating income	$	35,200			$	49,600			$	59,200

^* Includes all product costs (i.e., direct materials, direct labor, and manufacturing overhead).

Includes all period costs (i.e., selling, general, and administrative expenses).

The company expects about 30% of sales to be cash transactions. Of sales on account, 60% are expected to be collected in the first month after the sale is made, and 40% are expected to be collected in the second month after sale. Depreciation, insurance, and property taxes represent $19,200 of the estimated monthly cost of goods sold and $12,800 of the estimated monthly operating expenses. The annual insurance premium is paid in January, and the annual property taxes are paid in August. Of the remainder of the cost of goods sold and operating expenses, 80% are expected to be paid in the month in which they are incurred, and the balance is expected to be paid in the following month.

Current assets as of April 1, 2016, consist of cash of $22,400 and accounts receivable of $239,680 ($167,776 from March credit sales and $71,904 from February credit sales). Current liabilities as of April 1 consist of $28,800 of accounts payable for product costs incurred in March; $7,360 of accrued liabilities for operating expenses incurred in March; and a $64,000, 10%, 120-day note payable that is due on April 17, 2016.

An estimated income tax payment of $64,000 will be made in May. The regular quarterly dividend of $25,600 is expected to be declared in May and paid in June. Capital expenditures amounting to $27,520 will be made in April.

NOTE: THE NUMBERS IN THE CHART ARE CORRECT

b. Assume that management of SeaTech Inc. desres to maintain a minimum cash balance of S 19.100 at the beginning of each month and has arranged a S100 000 l ne of credit with a local bank at an interest rate of 10% to ensure the availabl y of funds. Borrowing transactions are to occur only at the end of months in which the budgeted cash balance would otherwise fall short of the S19,100 minimum balance. Repayments of principal and interest are to occur at the end of the earliest month in which sulficient funds are expected to be available for repayment. (Do not round intermediate calculations. Use 360 days year for calculations.) Cash Budget For the months of April, May, and June, 2016 April May June Beginning cash balance Cash Receipts From ossh sales made in ourrent month From credit sales made in 22.400 67.200 1,800 91 200 71,004 67,110 March April May 00,686 62.720 114.240 262.170|$ 242.700 IS 268 160 94,080 Total cash available For cost of goods sold/operating expenses incurred in March 38,180 April 25,440 31,360 152,320 May 38.080 170.240 June For payment of note payable and interest For capital expenditures For payment of income taxer For payment of dividends Total disbursements Excess (deficiency) of cash available over disbursements 86,133 27 520 64,000 255,253S 247,880 S 208 320 6.81 Interest Ending cash balance 0.91