Toys for You, a manufacturing company, has been growing quickly but has found that its financial situation is continually under pressure. Production has fluctuated to meet demand in an attempt to provide first$-$class service, resulting in larger inventory positions. Also, the collection of accounts has worsened to approximately $60$ days, which is well above the terms of $30$ days. To address the finanical concerns, Toys for You has proposed level production and an effort by the credit department to bring the average collection period down to $35$ days. Estimated sales for the upcoming months are: July $$1,957,500$ October $2,362,500$ August $2,070,000$ November $2,475,000$ September $2,205,000$ December $2,565,000$ Sales for May were $$1,732,500$ and will be approximately $$1,845,000$ for the current month of June. It is projected that the current collection period of $60$ days will be reduces to $50$ days for July and August, $42$ days for September and October, and will meet the target of $35$ days in November and December. Purchases are forecast to be $$585,000$ a month beginning in July. In May they were $$630,000$ and in June they are expected to be $$592,500.$ The purchases are paid in $40$ days. Labour expense will be paid when incurred and will be $$195,000$ a month. Other expenses of manufacturing will also be paid as incurred and are expected to be $$375,000$ a month. Cost of goods sold has regularly been $70$ percent of sales. Amortization is $$38,000$ per month. Selling and administrative expenses are expected to be $13$ percent of sales. The tax rate is $42$ percent. There will be payments on notes of $$675,000$ in each of August and November. Interest of $$270,000$ and income taxes of $$338,000$ are both due in October. Dividends of $$22,500$ are payable in July and October. TOYS FOR YOU Balance Sheet $($estimated$)$ June $30,2012($$ thousands$)$ Assets Current assets: Cash $$666$ Accounts receivable $3,578$ Inventory $8,231$ Total current assets $12,475$ Capital assets: Plant and equipment $11,273$ Less: Accumulated amortization $4,7846,489$ Total assets $$18,964$ Liabilities and Shareholders' Equity Current liabilities: Accounts payable $$945$ Notes payable $3,700$ Accrued liabilities $2,596$ Total current liabilities $7,241$ Long$-$term debt $4,725$ Common stock $4,500$ Retained earnings $2,498$ Total liabilities and shareholders' equity $$18,964$ Using the information above, prepare proforma statements for Toys for You for the three months ending September and December $2012.$ Also construct a cash budget for the six$-$month period and identify any need for short$-$term financing. There are no changes in accounts not mentioned above. Comment on the policy changes and examine the consequences if the collection period remains at $60$ days. Assume capital assets are sufficient for increased sales.