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