6. Prepare PROBLEM 9-21 Cash Budget with Supporting Schedules (102) Scott Products Inc. is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Scott Products has had to be money during the third quarter to support peak sales of back-to-school materials, which occur dure August. The following information has been assembled to assist in preparing a cash budget for the quan a Budgeted monthly absorption costing income statements for July through October are as follows October July $40.000 24.000 16,000 $45.000 August $70,000 42.000 28,000 September $50,000 30.000 20,000 18.000 Sales Cost of goods sold. Gross margin. Selling and administrative expenses: Selling expense Administrative expense Total expenses. Operating income Includes $2.000 depreciation each month 7.300 5.900 7.200 5,600 12.800 $ 3.200 11.700 7,200 18 900 $ 9.100 8.500 6.100 14,600 $ 5.400 13,200 $ 4.800 Sales are 20% for cash and 80% on credit. Credit sales are collected over a three-month period, with 10% collected in the month of sale, 700 in the month following sale, and 20% in the second month following sale. May sales totalled $30,000, and June sales totalled $36.000 Inventory purchases are paid for within 15 days. Therefore, 50% of a month's inventory purchase is paid for in the month of purchase. The remaining 50s is paid in the following month. Acco payable for inventory purchases at June 30 total 17.700. e. The company maintains its ending inventory levels at 75% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $18,000 f Land costing $4,500 will be purchased in July 8 Dividends of S1,000 will be declared and paid in September The cash balance on June 30 is $8,000; the company must maintain a cash balance of at least this amount at the end of each month The company has an agreement with a local bank that allows the company to borrow up to a to loan balance of $40,000. The interest rate on these loans is 15 per month. All borrowing is done the beginning of a month. The company would, as far as it is able, repay the loan at the end of each month. Interest must be paid at the end of each month based on the outstanding loans for that month. There are no loans outstanding as at June 30. Required: 1. Prepare a schedule of expected cash collections for July August, and September and for the quarter 2. Prepare the following for merchandise inventory A merchandise purchases budget for July, August, and September b. A schedule of expected cash disbursements for merchandise purchases for July, August, and September and for the quarter in total 3. Prepare a cash budget for July, August, and September and for the quarter in total adult Channinu simtions 1.021 in total CHECK FIGURE 1. Expected cash collec tions July = $36,160 2a. Merchandise purchases August = $33.000: 3. Excess (deficiency) of cash avail able over disbursements September = $23.625