Managerial AccountantHancock Company, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter.a. As of December 31 (the end of the prior quarter), the companys balance sheet showed the following account balances:Cash $ 6,700 Accounts receivable 36,900 Inventory 11,130 Buildings and equipment (net) 120,000 Accounts payable $ 32,880 Common stock 100,000 Retained earnings 41,850 $174,730 $174,730b. Actual and budgeted sales are as follows:December (actual) $61,500 January $79,500 February $88,800 March $89,400 April $58,100c. Sales are 40% for cash and 60% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at December 31 are a result of December credit sales. d. The companys gross margin percentage is 30% of sales. (In other words, cost of goods sold is 70% of sales.) e. Each months ending inventory should equal 20% of the following months budgeted cost of goods sold. f. One-quarter of a months inventory purchases is paid for in the month of purchase; the other three-quarters are paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. g. Monthly expenses are as follows: commissions, $12,150; rent, $2,650; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,550 for the quarter and includes depreciation on new assets acquired during the quarter. h. Equipment will be acquired for cash: $3,830 in January and $8,100 in February. i. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.Required: Using the data above, complete the following statements and schedules for the second quarter:1. Schedule of expected cash collections:January February March Total Cash sales $31,800.00 Credit sales 36,900.00 Total collections $68,700.002. a. Merchandise purchases budget:January February March Total Budgeted cost of goods $55,650.00 * $62,160.00 Add desired ending inventory 12,432.00 Total needs 68,082.00 Less beginning inventory 11,130.00 Required purchases $56,952.00*$79,500.00 sales 70% = $55,650.00. $88,800.00 70% 20% = $12,432.00.b. Schedule of expected cash disbursements for merchandise purchases:January February March Total December purchases $32,880.00 * $32,880.00 January purchases 14,238.00 $42,714.00 56,952.00 February purchases 0.00 March purchases 0.00 Total cash disbursements for purchases $47,118.00*Beginning balance of the accounts payable.3. Schedule of expected cash disbursements for selling and administrative expenses:January February March Total Commissions $12,150.00 Rent 2,650.00 Other expenses 6,360.00 Total cash disbursements for selling and administrative expenses $21,160.004. Cash budget:January February March Total Cash balance, beginning $ 6,700.00 Add cash collections 68,700.00 Total cash available 75,400.00 Less cash disbursements: For inventory 47,118.00 For operating expenses 21,160.00 For equipment 3,830.00 Total cash disbursements 72,108.00 Excess (deficiency) of cash 3,292.00 Financing Etc.5. Prepare an income statement for the quarter ending March 31 as shown in Schedule 9 in the Chapter 7.6. Prepare a balance sheet as of March 31.