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Deacon Company is a merchandising company that is preparing a budget for the second quarter of the calendar year. The following information is available.

DEACON COMPANY
Balance Sheet
March 31
Assets
Cash	$	54,000
Accounts receivable		40,000
Inventory		45,000
Plant and equipment, net of depreciation		90,000
Total assets	$	229,000
Liabilities and Shareholders Equity
Accounts payable	$	51,000
Common shares		79,000
Retained earnings		99,000
Total liabilities and shareholders equity	$	229,000

Budgeted Income Statements
	April			May			June
Sales	$	92,000		$	114,000		$	137,000
Cost of goods sold		55,200			68,400			82,200
Gross margin		36,800			45,600			54,800
Selling and administrative expenses		12,000			11,000			10,000
Operating income	$	24,800		$	34,600		$	44,800

Budgeting Assumptions:

Sixty percent of sales are cash sales and 40 percent of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80 percent are collected in the month subsequent to the sale.

Budgeted sales for July are $133,000 while the budgeted cost of goods sold is 60%.

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.

Each months ending merchandise inventory should equal $13,000 plus 50% of the next months cost of goods sold.

Depreciation expense is $1,400 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.

Required:

1. Calculate the expected cash collections for April, May, and June.

2. Calculate the budgeted merchandise purchases for April, May, and June.

3. Calculate the expected cash disbursements for merchandise purchases for April, May, and June.

4. Prepare a budgeted balance sheet at June 30. (Hint: You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30 balance sheet.)

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