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

Current assets as of December 31:

Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,000

Accounts receivable . . . . . . . . . . . . . . . . . . $36,000

Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . $9,800

Buildings and equipment, net. . . . . . . . . . . . . $110,885

Accounts payable. . . . . . . . . . . . . . . . . . . . . . $32,550

Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . $100,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . $30,135

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) . . . . . . . . $60,000

January . . . . . . . . . . . . . . . . $70,000

February. . . . . . . . . . . . . . . . $80,000

March. . . . . . . . . . . . . . . . . . $85,000

April . . . . . . . . . . . . . . . . . . . $55,000

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 month's ending inventory should equal 20% of the following month's budgeted cost of goods sold.

e. One-quarter of a month's 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, $12,000; rent, $1,800; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter.

g. Equipment will be acquired for cash: $3,000 in January and $8,000 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.

Required:

Using the data above:

1. Complete the following schedule:

2. Complete the following:

3. Complete the following schedule:

4. Complete the following cash budget:

5. Prepare an absorption costing income statement, similar to the one shown in Schedule 9 on page 393, for the quarter ended March 31.
6. Prepare a balance sheet as of March31.

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Schedule of Expected Cash Collections January February March Quarter Cash sales. Credit sales 36,000 Total collections$64,000 $28,000 Merchandise Purchases Budget January February March Quarter Budgeted cost of goods sold... Add desired ending inventory11.200 Total needs. Less beginning inventory....9,800 Required purchases $49,000 60,200 $50,400 $70,000 sales 1$80,000 70% 70% $49,000 20% $11,200 Schedule of Expected Cash dise Purchases January February March Quarter $32,550 50,400 December purchases January purchases February purchases March purchases. Total disbursements.. $32,550 12,600 $37,800 $45,150 Beginning balance of the accounts payable Schedule of Expected Cash Disbursements-Selling and Administrative Expenses January February March Quarter $12.000 CommissionsOAN Rent... 1,800 5.600_ Total disbursements.. $19,400 Cash Budget January February March Quarter Cash balance, beginning 6,000 64,000 Add cash collections Total cash available. Less cash disbursements: 70,000 For inventory 45,150 19,400 3,000 67,550 For operating expenses For equipment. Total cash disbursements Excess (deficiency) of cash . . . Financing Etc. ,450