The following data relate to the operations of Shilow Company, awholesale distributor of consumer goods:

Current assets as ofMarch 31:
Cash	$	8,700
Accounts receivable	$	24,800
Inventory	$	46,800
Building and equipment, net	$	116,400
Accounts payable	$	28,050
Common stock	$	150,000
Retained earnings	$	18,650

The gross margin is 25% of sales.

Actual and budgeted sales data:

March (actual)	$	62,000
April	$	78,000
May	$	83,000
June	$	108,000
July	$	59,000

Sales are 60% for cash and 40% on credit. Credit sales arecollected in the month following sale. The accounts receivable atMarch 31 are a result of March credit sales.

Each month’s ending inventory should equal 80% of the followingmonth’s budgeted cost of goods sold.

One-half of a month’s inventory purchases is paid for in themonth of purchase; the other half is paid for in the followingmonth. The accounts payable at March 31 are the result of Marchpurchases of inventory.

Monthly expenses are as follows: commissions, 12% of sales;rent, $3,500 per month; other expenses (excluding depreciation), 6%of sales. Assume that these expenses are paid monthly. Depreciationis $873 per month (includes depreciation on new assets).

Equipment costing $2,700 will be purchased for cash inApril.

Management would like to maintain a minimum cash balance of atleast $4,000 at the end of each month. The company has an agreementwith a local bank that allows the company to borrow in incrementsof $1,000 at the beginning of each month, up to a total loanbalance of $20,000. The interest rate on these loans is 1% permonth and for simplicity we will assume that interest is notcompounded. The company would, as far as it is able, repay the loanplus accumulated interest at the end of the quarter.

Required:

Using the preceding data:

How do I find the beginning inventory?

Prepare an absorption costing income statement for the quarterended June 30.

Prepare a balance sheet as of June 30.