The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash Accounts receivable Inventory Building and equipment, net Accounts payable Common stock Retained earnings $19,299 $ 38,400 $124,803 $22,898 $ 150,000 $16,990 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual) April May June July $ 48,000 $ 64,000 $ 69,000 $94.000 $ 45,000 c. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. d. Each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold. e. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory. f. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,100 per month; other expenses (excluding depreciation). 6% of sales. Assume that these expenses are paid monthly. Depreciation is $936 per month (includes depreciation on new assets). g. Equipment costing $1,300 will be purchased for cash in April. h. Management would like to maintain a minimum cash balance of at least $4,000 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 Required 1 Required 2 Required 3 Required 4 Required 5 Prepare an absorption costing income statement for the quarter ended June 30. Shilow Company Income Statement For the Quarter Ended June 30 Sales $ 227,000 Cost of goods sold: Beginning inventory 38,400 Purchases 158,850 Goods available for sale 197.250 Ending inventory 27.000 170,250 Gross margin 58.750 Selling and administrative expenses: Commissions 27.240 Rent 6.300 Depreciation Other expenses Net operating income Interest expense Net income 13.620 < Required 3 47.160 9.500 210 9.380 Required 5 >