Question 1. Sophisticates, Inc., a distributor of jewellery throughout California, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company's accounting records All sales are on account. Sixty percent of the customer accounts are collected in the month of sale; 35 percent are collected in the following month Uncollectibles amounting to 5 percent of sales are anticipated and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that recovery will be in January 20x1 Seventy percent of the merchandise purchased are paid for in the month of purchase, the remaining 30 percent are paid for in the month after acquisition . The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $60,000; accounts receivable, $165,000; and accounts payable, $66,000 'Sophisticates, Inc. maintains a $60,000 minimum cash balance at all times Financing is available (and retired) in $1,000 multiples at an 8 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time Additional data JanuaryFebruary March $450,000 $540,000 $555,000 300,000 420,000 270,000 93,000 Merchandise purchases Proceeds from sale of equipment REQUIRED A. Prepare a schedule that discloses the firm's cash needs, if any, for January 72,000 135,000 15,000 through March. The schedule should present the following information in the order cited: Beginning cash balance, total receipts, total payments, the cash excess (deficiency) before financing, borrowing needed to maintain minimum balance, loan principal repaid, loan interest paid, and ending cash balance B. Discuss the importance of predictions and assumptions in the budgeting process