The following data relate to the operations of Dillinger Company, a wholesale distributor of consumer goods:

Current assets as of March 31:Cash$22,000Accounts receivable$24,000Inventory$11,340Buildings and equipment (net)$210,000Accounts payable$43,500Capital stock$47,000Retained earnings$176,840

a.Gross margin is 30% of sales.b.Actual and budgeted sales data:

March (actual)$ 80,000April$ 81,000May$ 102,000June$ 115,000July$ 92,000

c.Sales are 70% for cash and 30% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are the result of March credit sales.

d.Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold.e.25% of a month's inventory purchases is paid for in the month of purchase; the remainder is 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, $19,500; rent, $4,300 per month; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $5,000 per month(includes depreciation on new assets).

g.Equipment costing $12,000 will be purchased for cash in April.h.The company must maintain a minimum cash balance of $5,000. 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).

5.Prepare an absorption costing income statement for the quarter ended June 30.

6.Prepare a balance sheet as of June 30.