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

Current assets as of December 31:
Cash	$	6,100
Accounts receivable	$	40,500
Inventory	$	10,430
Buildings and equipment, net	$	115,900
Accounts payable	$	32,410
Capital stock	$	100,000
Retained earnings	$	40,520

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)	$67,500
January	$74,500
February	$80,200
March	$94,100
April	$56,100

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, $12,250; rent, $2,200; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,740 for the quarter and includes depreciation on new assets acquired during the quarter.
g.	Equipment will be acquired for cash: $7,200 in January and $8,090 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.

Budgeted cost of goods sold for January = $74,500 sales 70% = $52,150.

Add desired ending inventory for January = $80,200 70% 20% = $11,228

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
Purchases
Goods available for sale	0
Ending inventory		0
Gross margin		248,800
Selling and administrative expenses:
Commissions
Rent
Depreciation
Other expenses
		0
Net operating income		248,800
Interest expense
Net income		248,800

Prepare a balance sheet as of March 31.

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