Scott Products Inc. is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Scott Products has had to borrow money during the third quarter to support peak sales of backtdschool materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter: Budgeted monthly absorption costing income statements for for July through October ' are as follows: J u ly August September October Sales $40,000 $70,000 $50,000 $45,000 lCost of goods sold 24,000 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 Adm'Q'Strat'Ve 5,600 7,200 6,100 5,900 expense Total expenses 12,800 18,900 14,600 13,200 lOperating income $ 3,200 $ 9.100 $ 5,400 $ 4,800 " Includes $2,000 depreciation each month. :'LD-'H . Sales are 20% for cash and 80% on credit. . Credit sales are collected over a threemonth 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 totalled $30,000, and June sales totalled $36,000. . Inventory purchases are paid for within 15 days. Therefore, 50% of a month's inventory purchases 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. .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. Land costing $4,500 will be purchased in July. . Dividends of $1,000 will be declared and paid in September. . 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. The company has an agreement with a local bank that allows the company to borrow up to a total loan balance of $40,000. The interest rate on these loans is 1% per month. All borrowing is done at the beginning ofa month. The company would, as far as it is able, repay the loan at the end of each month. Interest must be paid at the end of each month based on the outstanding loans for that month. There are no loans outstanding as at June 30. 3. Prepare a cash budget for July, August, and September and for the quarter in total. (Round your intermediate calculations and final answers to the nearest whole dollar. Cash deficiency, repayments and interest should be indicated by a minus sign.)Cash Budget For the Quarter Ended September 30 July August September Quarter Cash balance, beginning $ 8,000 $ 8,410 x $ 8,020 X $ 8,000 Add collections from sales 36, 160 47,760 59,600 143,520 Total cash available 44, 160 56, 170 67,620 151,520 Less disbursements: For inventory purchases 30,450 35,250 30,375 V 96,075 For selling expenses 7,200 11,700 8,500 27,400 For administrative expenses 3,600 5,200 4, 100 V 12,900 For land 4,500 4,500 For dividends 1,000 v 1,000 Total disbursements 45,750 52, 150 43,975 141,875 Excess (deficiency) of cash available over disbursements (1,590) 4,020 23,645 9,645 Financing: Borrowings 10,000 X 4,000 X 14,000 X Repayment (14,000) X (14,000) X Interest (380) X (380) X Total financing 10,000 4,000 (14,380) (380) Cash balance, ending $ 8,410 $ 8,020 $ 9,265 $ 9,265