Elswick 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, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter: 1. 2. Budgeted monthly absorption costing income statements for JulyOctober are as follows:- July August September October Sales 40000 70000 50000 45,000 Cost of goods sold 24,000 42 000 30,000 27,000 Gross margin 16,000 28,000 20,000 18,000 Selling and administrative expenses: Selling expense 7,200 11,700 8,500 7,300 Administrative expense' 5,600 7,200 6,100 5,900 Total selling and administrative expenses 12,800 18,900 14,600 13,200 Net Operating income Q Q *lncludes 2,000 depreciation each month. Sales are 20% for cash and 80% on credit. Credit sales are collected over three months with 10% collected in the month of sale, 70% 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 purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable for inventory purchases on June 30 total 1 1,700. 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 on June 30 is 18,000. Land costing 4,500 will be purchased in July. Dividends of 1,000 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 it to bonow in increments of 1,000 at the beginning of each month, up to a total loan balance of 40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. Required: 3) Prepare a schedule of expected cash collections for July, August. and September and the quarter in total. (7 marks) Prepare the following for merchandise inventory:- i. A merchandise purchases budget for July, August, and September (5 marks) ii. A schedule of expected cash disbursements for merchandise purchases for July, August, and September and the quarter in total. (5 marks) Prepare a cash budget for July, August, and September and the quarter in total. (3 marks) (Total 25 marks)