16 Question 5 M04 OMB Ltd. 's September balance sheet contains the following information: Cash Accounts receivable Allowance for doubtful accounts Merchandise inventory $30,000 (dr) 100,800 (dr) 2,240 (cr) 21,000 (dr) Management has designated $30,000 as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows: 1. Sales revenues of $280,000, $336,000, and $250,000 are expected for October, November, and December, respectively. All goods are sold on account. The collection pattern for accounts receivable is 55% in the month of sale, 44% in the month following the month of sale, and 1% uncollectible, which is set up as an allowance 2, 3, Cost ofgoods sold is 60% ofsales revenues. Management's target ending balance of merchandise inventory is 10% of the current month's sales. 4. 5. All accounts payable for inventory ae paid in the month of purchase. 6. Other monthly expenses are $37,800, which includes $2,800 of amortization but does not include bad debl expense. 7. Borrowings and investments can only be made in $5,000 increments at the end of a month. Interest is charged at the rate of 10% per year, interest will be earned at the rate of 8% per year Required a. Prepare a cost of purchases schedule for October and November. b. Prepare the cash budgets for October and November including the effects of financing 6 10 (borrowing or investing)