QUESTION 1-Water Sport Inc. manufactures a small personal water tube used for children learning to swim. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist:

a. The Marketing Department has estimated sales as follows for the remainder of the year (number of water tubes):

July	6,600	October	3,000
August	5,100	November	2,600
September	4,100	December	2,100

The selling price of the water tubes is $60.

b. All sales are on account. Based on past experience, sales are expected to be collected in the following pattern:

50	%	in the month of sale
45	%	in the month following sale
5	%	uncollectible

The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $160,500.

3. The company maintains finished goods inventories equal to 20% of the following months sales. The inventory of finished goods on July 1 will be 1,320 units.
4. Each water tube requires 3 kilograms of synthetic polyisoprene rubber compound. To prevent shortages, the company would like the inventory of synthetic rubber compound on hand at the end of each month to be equal to 20% of the following months production needs. The inventory of synthetic rubber compound on hand on July 1 will be 3,780 kilograms.
5. The synthetic rubber compound costs $4.00 per kilogram. Water Sport pays for 70% of its purchases in the month of purchase; the remainder is paid for in the following month. The accounts payable balance for synthetic rubber compound purchases will be $11,700 on July 1.

   3. Prepare a direct materials purchases budget for synthetic rubber compound, by month and in total, for the third quarter. Also prepare a schedule of expected cash disbursements for synthetic rubber compound, by month and in total, for the third quarter.

   QUESTION 2-Colerain Corporation is a merchandising company that is preparing a budget for the third quarter of the calendar year. The companys balance sheet as of June 30 is shown below:

   COLERAIN CORPORATION Balance Sheet June 30
   Assets
   Cash	$ 90,000
   Accounts receivable	136,000
   Inventory	62,000
   Plant and equipment, net of depreciation	300,000
   Total assets	$ 588,000
   Liabilities and Shareholders Equity
   Accounts payable	$ 71,000
   Common shares	400,000
   Retained earnings	117,000
   Total liabilities and shareholders equity	$ 588,000

   Colerains managers have made the following additional assumptions and estimates:

6. Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, respectively.
7. All sales are on credit and all credit sales are collected. Each months credit sales are collected 30% in the month of sale and 70% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.
8. Each months ending inventory must equal 30% of the cost of next months sales. The cost of goods sold is 70% of sales. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.
9. Monthly selling and administrative expenses are always $75,000. Each month, $10,000 of this total amount is depreciation expense and the remaining $65,000 relates to expenses that are paid in the month they are incurred.
10. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common shares or repurchase its own shares during the quarter ended September 30

    1. Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.

    2a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

    2b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30th.

    3. Prepare an income statement for the quarter ended September 30. (Do not leave any empty spaces; input a 0 wherever it is required.)

    4. Prepare a balance sheet as of September 30.