Farber Corp., a distributor of her-based sunscreen, is ready to begin its 3-quarter, in which peak sales occur. The company has requested a $40,000 90 -day loan from its bank to help meet cash requirements during the quarter. Since Farber has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled: a) On July 1, the beginning of the third quarter, the company will have a cash balance of $44,500 b) Actual sales for the last 2 month and budgeted sales for the 3 quarter follow (all sales are on account): May (actual) $250, 000 June (actual)$300,000 July (budgeted) $400,000 August (budgeted)$600,000 September (budgeted) $ 320,000 Past experience shows that 25 % of a month's sales are collected in the month of sale, 70 % in the month following sales, and 3 % in the second month following sale. The remainder is uncollectible. c) Budgeted merchandise purchases and budgeted expenses for the 3-quarter are given below: July August September Merchandise purchases $240,000 $350,000 $175,000 Salaries & Wages $45,000 $50,000 $40,000 Advertising $130,000 $145,000 $80,000 Rent Payment $9,000 $9,000 $9,000 Depreciation $10,000 $10,000 $10,000 Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July, totals $180,000 d) Equipment costing $10,000 will be purchased for cash during July e) In preparing the cash budget, assumes that the $40,000 loan will be made in July and repaid in September. Interest on loan will total $1,200 1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. 2. Prepare a cash budget, by month and in total for the third quarter. 3. If the company needs a minimum cash balance of $20,000 to start each month, can the loan be repaid as planned? Explain