$1.$ Prepare a merchandise purchases budget for October and November$\mathrm{.}2.$ Prepare the cash budgets for October and November, including the effects of financing $($borrowing or investing$).$ Interest is earned or naid Quarterly

Cash $ $37,500($dr$)$

Accounts receivable $126,000($dr$)$

Allowance for doubtful accounts $2,800($cr$)$Merchandise inventory $26,250($dr$)$Management has designated $$37,500$ as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows:$*$ Sales revenues of $$350,000,$ $$420,000,$ and $$312,500$ are expected for October, November, and December, respectively. All goods are sold on account.$**$ The collection pattern for accounts receivable is $60\%$ in the month of sale, $39\%$ in the month following the month of sale, and $1\%$ uncollectible, which is set up as an allowance.$*$ Cost of goods sold is $60\%$ of sales revenues.$*$ Management's target ending balance of merchandise inventory is $10\%$ of the current month's budgeted cost of goods sold.$*$ All accounts payable for inventory are paid in the month of purchase.$*$ Other monthly expenses are $$49,250,$ which includes $$3,500$ of depreciation and $$2,000$ of bad debt expense.$*$ In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short$-$term investments. Borrowings and investments are assumed to be made at the end of a month in increments of $$6,250.*$ Interest on borrowings is $10\%$ per year, payable every quarter, on the accumulated amount of the loan; similarly, interest earned on investments is $8\%$ per year on the accumulated investments and is received every quarter. Investments can be matured and the principal amount redeemed in June or December of a year.