\f1 in. Sales are 20% for cash and 80% on credit c Credit sales are collected overa three-month period. with 10% collected In the month ofsale. 70% in the month following sale, and 20% inthe second month following sale. May sales totalled $101000. and June sales totalled $108000 d. Inventory purchases are paid for w1thln15 days. Therefore. 50% ofa month's Inventory purchases are paid for In the month of 6 purchase. The remaining 50% are paid in the following month. Accounts payable for Inventory purchases at June 30 total $35,100. \"in\" e. The company maintains Its ending Inventory levels at 75% ofthe cost of the merchandise to be soid In the following month. The merchandise inventory at June 30 is $54000. f. Land costing $7.500 will be purchased in July. g. Dividends of $7,000 wrli be declared and paid In September. h. The cash balance on June 30 Is 520.000: the company must maintain a cash balance ofat least this amount at the end of each month. I. The company has an agreement wrth a local bank that allows It to borrow In increments of $1,000 at the beginning ofeach 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 compound ed. The company would. as tar as It Is able. repay the loan plus accumulated interest at the end of the quaneL The company's president is interested in knowing how reduclng invemory levels and collecting accounts receivable sooner will impact the cash budget. He revlses the cash collection and ending Inventory assumptions astollows: a. Sales continue to be 20% for cash and 80% on credit However. credit sales from July. August. and September are collected over a three-month period. with 25% collected In the month ofsale. 60% collected In the month following sale. and 15% in the second month following sale. Credit sales from May and June are collected dunng the third quarter using the collection percentages specied In the main section in. The company maintains Its ending Inventory leveLs for July. August, and September at 25% of the cost of merchandise to be sold in the following month The merchandise Inventory on June 30 remains $54000, and accounts payable for Inventory purchases on June 30 remain $35,100. Return to qu