Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th.

Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available

Deacon Company

Balance Sheet

March 31

AssetsCash$62,000

Accounts receivable 43,600

Inventory 46,000

Buildings and equipment, net of depreciation 107,000

Total assets$258,600

Liabilities and Stockholders' Equity

Accounts payable$63,600

Common stock 70,000

Retained earnings 125,000

Total liabilities and stockholders' equity$258,600

Budgeted Income Statements 

     April...... May...... June

Sales$120,000....... $130,000 .......$150,000

Cost of goods sold 72,000......  78,000......  90,000

 Gross margin 48,000......  52,000......  60,000

Selling and administrative expenses 24,900......  26,400......  29,400

Net operating income$23,100 $25,600 $30,600

Budgeting Assumptions:

1. 60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale.
2. Budgeted sales for July are $160,000.
3. 10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. The accounts payable at March 31 will be paid in April.
4. Each month's ending merchandise inventory should equal $10,000 plus 50% of the next month's cost of goods sold.
5. Depreciation expense is $1,900 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.