The company is planning its cash needs for the third quarter of 2012, and the following information is available to assist in preparing a cash budget. Budgeted income statements for July through October 2012 are as follows:

July August September October

Sales $18,000 $24,000 $28,000 $36,000

COGS (10,000) (14,000) (16,000) (20,000)

Gross profit 8,000 10,000 12,000 16,000

Less other selling exp

Selling 2,300 3,000 3,400 4,200

Administrative 2,600 3,000 3,200 3,600

Total (4,900) (6,000) (6,600) (7,800)

Net income $3,100 $4,000 $5,400 $8,200

Additional information:

1. Other expenses which are paid monthly, include $1,000 of depreciation per month.

2. Sales are 30 percent for cash and 70 percent on credit.

3. Credit sales are collected 20 percent in the month of sale, 70 percent one month after sale, the sale, and 10 percent two months after the sale. May sales were $15,000 and June sales were $16,000.

4. Merchandise is paid for 50 percent in the month of the purchase and; the remaining 50 percent is paid the following month. Accounts payable for merchandise at June 30 totaled $6,000.

5. The company maintains its ending inventory levels at 25 percent of the cost of goods to be sold in the following month. The inventory at June 30 is $2,500

6. An equipment note of $5,000 per month is being paid through August.

7. The company must maintain a cash balance of at least $5,000 at the end of each month. The cash balance on June 30 is $5,100.

8. The company can borrow from its bank as needed. Borrowings and repayments must be in multiples of $100. All borrowings takes place at the beginning of the month, and all repayments are made at the end of a month. When the principal is repaid, an interest on the repayment is also paid. The interest rate is 12 percent per year.

Required

a. Prepare a monthly schedule of budgeted operating cash receipts for July, August, and September.

b. Prepare a monthly purchase budget and a schedule of budgeted cash payments for purchases in July, August and September.

c. Prepare a monthly cash budget for July, August and September. Show borrowings from the companys bank and repayments to the bank as needed to maintain the minimum cash balance. This is the order I am looking for. It starts with the cash budget, then the purchase and payment budget, finally the monthly cash budget. Here is how it should look. I apologize if the format is off. Cash budget a) Cash collections schedule: May June July Aug Sept Sales Cash 30% Credit 70% A/R schedule From credit sales: May $ - June $ - $ - July $ - $ - $ - Aug $ - $ - Sept $ - Total credit collections $ - $ - $ - Cash sales $ - $ - $ - Total cash collected: $ - $ - $ - b) purchases and payments budget Beginning inventory + Purchases - Ending inventory COGS Payments From: June $6,000 July $0 $0 Aug $0 $0 Sept $0 Total merchandise payments: $6,000 $0 $0 c) Monthly Cash Budget July Aug Sept Beginning cash balance: Short-term bank financing principal: Cash Collections: Total cash available $0 $0 $0 Disbursements Payments for merchandise Expenses Equipment note Disbursements: subtotal $0 $0 $0 Financing Short-term principal repayment Interest expense $0 Total disbursements $0 $0 $0 Ending cash balance $0 $0 $0 Total quarterly financing: $0 Total quarterly interest expense July principal: $0 Aug principal: $0