3: (16 points) Racing Inc. is a merchandising company that sells a single product-mechanical keyboard. Paul, the chief financial officer, is preparing for a cash budget for the first quarter of 2021. The accounting record of 2020 shows that the company sold $450,000 in October, $500,000 in November, and $300,000 in December and that the cost of goods sold was 60% of sales. John estimates sales in January, February, and March of 2021 to be $350,000, $400,000, and $450,000, respectively. In addition, sales in April, May, and June of 2021 will be 1,000 units higher than the preceding month. To prepare for fluctuations in product market demand, the company plans to maintain 10% of the next two months' sales as ending inventory. TypeFast, the long-time supplier of Racing Inc., has agreed to sell mechanical keyboards to the company in 2021. Although TypeFast will charge 20% more on each keyboard sold to Racing Inc. in 2021 than in 2020, Racing Inc. plans to keep the selling price of its mechanical keyboard at $50 per unit. Operating expenses in the first quarter of 2021 are estimated to be (paid in the month incurred except for depreciation): Warehouse rent-$6,000 per month Insurance $1,500 per month Depreciation $2,000 per month Utilities $3,600 per month Advertising 8% of monthly sales Shipping expense-$3 per unit sold Salesperson salary-$5,000 per month Sales commission-7% of monthly sales Income taxes are 15% of pre-tax income and are calculated at the end of each quarter and paid in two installments: 40% due in the first month after the quarter end and the remainder due in the second month after the quarter end. The pre-tax income in the fourth quarter of 2020 is $27,000. All sales and purchases are on account. The collection pattern is as follows: 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. 60% of merchandise purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. In January 2021, the company plans to purchase additional office furniture costing $5,200. Racing Inc. has $35,000 cash on hand on December 31, 2020. The company wants to maintain a minimum cash balance of $25,000. On December 31, 2020, the company has $20,000 loan outstanding, which bears an annual simple interest of 12% and is scheduled to mature on January 31, 2021. The interest on this particular loan is accrued and paid every month. The company maintains a 15% open line of credit for the amount of $80,000 with Big Bear Bank. The borrowing must be in increments of $1,000. The company borrows and repays on the last day of the month. Required: Prepare a cash budget for January, February, March, and the quarter in total