HOMEWORKFINANCIAL BUDGETING TUTORIALDEADLINE: $21$th DECEMBER $2023$The trading company "MICHAEL" plans to operate for the next year. The companyclosed the previous comparable period with the following simplified balance sheet:Assets Value in USD Equities Value in USDFixed Assets $ $20000$ Owner$`$s equity $ $93000$Current Assets $ $167000$ Common share $ $65000$Inventory $($merchandise goods$)$ $ $150000$ Retained Earnings $ $28000$Account Receivables $ $12000$ Liabilities $ $94000$Cash and cash equivalents $ $5000$ Account Payables $ $84000$Wage Payables $ $-$Tax Payables $ $10000$Total assets $ $187000$ Total equities $ $187000$Based on the market observation and current market experience, the company plans toimplement sales revenues in the following months of the coming year, assuming theaverage value of purchases made by one customer at the level of USD $70.$Month Average daily number ofcustomersNumber of days monthlyJanuary $1525$February $2524$March $3527$April $7025$May $9025$June $11025$July $7026$August $5526$September $11525$October $9525$November $9824$December $16825$In December of the last year, the sales revenues was amounted at USD $180,000.$The company observed that $65\%$ of customers are purchasing merchandise goods forcash or with a payment card, while the remaining $35\%$ buy with a trade credit.Receivables are collected in the medium term over one month $($approx$.35$ days$).$Experience of co$-$operation with customers shows that $3\%$ of the value of salesrealized in a trade credit is in fact irrecoverable $($unpaid$).$ This is due to the nature of$2$the customers and market conditions. No actions are expected to be taken in the nearfuture that would effectively reduce the level of bad debts.The purchase costs of merchandise goods constitute $63\%$ of the sales value.Purchases are made one month before sale and are paid for in the second month afterpurchase. In November preceding the forecasted period, purchases were made forUSD $70,000.$ Employee wages expenses consist of a fixed component, totaling USD$12,500$ per month, and a variable component, accounting for $3\%$ of sales revenues.The fixed part of salaries are paid in cash at the end of the month while the variablepart is being paid one month after the closing of the month. Fixed costs related to themaintenance of a trade unit, such as rent for renting the facility, leasing fees forcommercial equipment, telephone charges etc. totaling USD $22,500$ per month. Theyare paid in cash in a given month.To maintain financial liquidity, the company maintains cash reserves of aminimum value of USD $15,000.$ If the cash balance drops below a certain level, thecompany can take out an overdraft secured by a corporate surety with interest of $6\%$per annum. The interest would be repaid in the next month, and the principalinstallment, if possible, in the following months. Pursuant to the bank's requirements,the borrowing and repayment of a loan secured with a corporate surety takes place inmultiples of USD $1,000.$ The income tax rate is $10\%.$ This tax is payable in the monthfollowing its calculation.Prepare the income statement budget and the cash flow budget of the abovetrading company for the next financial year.