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Question 1 (Total 10 marks) MingMing Company expects a peak sales will occur in third quarter. It has requested a $20,000, 90-day loan from its bank to help meet cash requirements during the quarter (July to September). Since MingMing Company has experienced difficulty in paying off its loan in the past, the loan officer at the bank has asked the company to prepare a cash budget forthe quarter. In response to this request, the following data has been assembled. a. On July 1, the company has a cash balance of $30,000. Actual sales for the last two months and budgeted sales for third quarter follow (all sales are on account). May (actual) $180,000 June (actual) $220,000 July (budgeted) $300,000 August (budgeted) $380,000 September (budgeted) $350,000 Past experience shows that 25% of a month's sales are collected in the month of sale, 65% in the month following sale, and 5% in the second month following sale. The remainder is uncollectible. Budgeted merchandise purchases and budgeted expenses for the third quarter are given below: July August September Merchandise purchase $180,000 $228,000 $210,000 Salaries and wages 30,000 32,000 32,000 Advertising 80,000 80,000 70,000 Rent payments 6,000 6,000 6,000 Depreciation 5,000 5,000 5,000 Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July total $135,000. Equipment costing $14,000 will be purchased for cash during July. In preparing the cash budget, assume that the $20,000 loan will be made in July and repaid in September. Interest on the loan will be total $600