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William Kitchenware, a retailer, commenced its operations on August 1 of the current year. On August 1, the business only assets were $20,000 in cash and $4,000 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below.

	Expected Sales
August	$14,000
September	24,000
October	16,000
November	30,000

The company would like the merchandise inventory on hand at the end of each month to be equal to 50% of the next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable selling and administrative expenses are expected to be 10% of sales. Fixed selling and administrative expenses (all depreciation) should be $3,000 per month. Cash payments for the variable operating expenses are made during the month the expenses are incurred.

Required:

a. Calculate budgeted net income for the month of September.

b. Calculate budgeted merchandise inventory to appear on the September 30^th balance sheet.

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