Janus Products, Inc., is a merchandising company that sells binders, paper, and other school sup- plies. 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: a. Budgeted monthly absorption costing income statements for July-October are as follows: Sales..... Cost of goods sold July $40,000 24,000 August September October $70,000 $50,000 $45,000 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 5,600 7,200 6,100 5,900 Total selling and administratire expenses.. 12,800 18,900 14,600 13,200 $ 3,200 $ 9,100 $ 5,400 $ 4,800 Administrative expense* Net operating income.... *Includes $2,000 depreciation each month. b. Sales are 20% for cash and 80% on credit. C. Credit sales are collected over a three-month period with 10% collected in the month of sale, 70% in the month following sale, and 20% in the second month following sale. May sales totaled $30,000, and June sales totaled $36,000. d. Inventory purchases are paid for within 15 days. Therefore, 50% of a month's inventory pur- chases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable for inventory purchases at June 30 total $11,700. 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. g. Dividends of $1,000 will be declared and paid in September. h. 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. i. The company has an agreement with a local bank that allows it to borrow 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 com- pounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. Required: 1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. 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.