The following information is used for Lucky’s Inc.’s monthly master budget.

The following information is used for Lucky’s Inc.’s monthly master budget.June’s balance sheet balances:

Cash$10,500Accounts payable$53,760Accounts receivable$80,000Capital stock$260,000Inventory$26,000Retained earnings$2,740Building and equipment (net)$200,000   

Actual sales for June and budgeted sales for July, August, and September:

June (actual)$140,000July (budget)$320,000August (budget)$180,000September (budget)$200,000

Sales are 25% cash and 75% on credit. All credit sales are collected in the following month. There are no bad debts.Gross margin percentage is 60% of sales.The desired ending inventory is expected to be 20% of the following month’s cost of goods sold. One fifth of the purchases are paid for in the month of purchase, and the remaining balance is purchased on credit and paid in the following month.The monthly cash operating expenses are $80,000, including the monthly depreciation expense of $7,000.During July, Lucky’s Inc. will purchase new office equipment for $17,000 cash.Dividends of $13,500 were declared and paid in July.The company must maintain a minimum cash balance of $25,000. A line of credit is used to maintain this balance. Borrowing will be made in increments of $1,000. All borrowing is done at the beginning of the month, and repayments are made at the end of the month. The annual interest rate is 12%, paid when the loan is repaid (ignore accrual of interest).

 

Required:Prepare a balance sheet, income statement, and cash budget for the month of July.