The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods:

Current assets as of December 31:
Cash	$	6,500
Accounts receivable	$	38,040
Inventory	$	10,850
Buildings and equipment, net	$	115,600
Accounts payable	$	32,740
Capital stock	$	100,000
Retained earnings	$	38,250

a.	The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.)
b.	Actual and budgeted sales data are as follows:

December (actual)	$63,400
January	$77,500
February	$80,300
March	$91,000
April	$58,800

c.	Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales.
d.	Each months ending inventory should equal 20% of the following months budgeted cost of goods sold.
e.	One-quarter of a months inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory.
f.	Monthly expenses are as follows: commissions, $11,640; rent, $1,900; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $5,430 for the quarter and includes depreciation on new assets acquired during the quarter.
g.	Equipment will be acquired for cash: $6,800 in January and $8,500 in February.
h.	Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

1. Compute the following schedule

Schedule of Expected Cash Collections
	January	February	March	Quarter
Cash sales	$31,000
Credit sales	38,040	46,500	48,180	132,720
Total collections	$69,040	$46,500	$48,180	$132,720

Complete the following:

Merchandise Purchases Budget
	January	February	March	Quarter
Budgeted cost of goods sold	$54,250	$56,210	$63,700	$174,160
Add desired ending inventory	11,242	12,740	8,232	8,232
Total needs	65,492	68,950	71,932	182,392
Less beginning inventory	10,850	11,242	12,740	10,850
Required purchases	$54,642	$57,708	$59,192	$171,542

Budgeted cost of goods sold for January = $77,500 sales 70% = $54,250.

Add desired ending inventory for January = $80,300 70% 20% = $11,242.

Schedule of Expected Cash DisbursementsMerchandise Purchases
	January	February	March	Quarter
December purchases	$32,740.00			$32,740.00
January purchases	$13,660.50	$40,981.50		$54,642.00
February purchases				$57,708.00
March purchases
Total disbursements	$46,400.50	$40,981.50	$0.00	$145,090.00

3. Compute the following schedule

Schedule of Expected Cash DisbursementsSelling and Administrative Expenses
	January	February	March	Quarter
Commissions	$11,640	$11,640	$11,640	$34,920
Rent	1,900	1,900	1,900	5,700
Other expenses	6,200
Total disbursements	$19,740	$13,540	$13,540	$40,620

4.

Complete the following cash budget: (Borrow and repay in increments of $1,000. Cash deficiency, repayments and interest should be indicated by a minus sign. Round your answers to 2 decimal places.)

Picanuy Corporation
Cash Budget
	January	February	March	Quarter
Cash balance, beginning	6,500.00			6,500.00
Add cash collections	69,040.00
Total cash available	75,540.00	0.00	0.00	6,500.00
Less cash disbursements:
For inventory	46,400.50
For operating expenses	19,740.00
For equipment	6,800.00	8,500.00
Total disbursements	72,940.50	8,500.00	0.00	0.00
Excess (deficiency) of cash	2,599.50	(8,500.00)	0.00	6,500.00
Financing:
Borrowings		$5,000.00
Repayments
Interest
Total financing	$0.00	$5,000.00	$0.00	$0.00
Cash balance, ending	$2,599.50	$(3,500.00)	$0.00	$6,500.00

5.

Prepare an absorption costing income statement for the quarter ended March 31.

Picanuy Corporation
Income Statement
For the Quarter Ended March 31
Sales		$248,800
Cost of goods sold:
Beginning inventory	$10,850
Purchases
Goods available for sale	10,850
Ending inventory		10,850
Gross margin		237,950
Selling and administrative expenses:
Commissions
Rent	5,700
Depreciation	5,430
Other expenses
		11,130
Net operating income (loss)		226,820
Interest expense
Net income (loss)		226,820

6.

Prepare a balance sheet as of March 31.

Picanuy Corporation
Balance Sheet
March 31
Assets
Current assets:
Cash
Account receivable		54,600
Inventory
Total current assets		54,600
Fixed assets-net
Total assets		$54,600
Liabilities and Stockholders Equity
Account payable
Bank loan payable
Stockholders' equity:
Capital stock
Retained earnings
		0
Total liabilities and stockholders equity		$0