Wonder Care is a wholesale distributor of industrial cleaning products.

The esti mated sales and purchases for the following year are given below: Last Qtr Sales $200,000 Purchase $126,000 Qtr 1 $300,000 $186,000 Qtr 2 $400,000 $246,000 Qtr 3 $500,000 $305,000 Qtr 4 $200,000 $126,000 Next Years Estimated Sales and Purchases The company normally collects 65% of a quarters sale before the quarter ends and anoth r 33% in the following quarter. The remainder is uncollectible. Purchases are paid 80% in the month of purchase with the remainder fully paid in the following month. Cash operating expenses for the next year are budgeted at $120,000 and the expen ses are expected to incur evenly throughout the year. Sales commissions are base d on 15% of sales. Depreciation is estimated at $40,000 per year. The company pays $10,000 dividends every quarter. Equipment purchases in cash ar e planned at $50,000 and $60,000 for the second and third quarters respectively. The cash balance at the end of the current year is $10,000.There is no minimum c ash balance requirement, but if it is budgeted that there is insufficient cash, the difference will be borrowed to meet its short term needs. All borrowings are done at the beginning of the quarter. All payments on principal, together with the interest are made at the end of a quarter. The annual interest rate is 10%. The company must borrow in multiples of $1,000. Required: (a) Prepare the cash collection for the next year. (b) Prepare the cash payments for purchases for the next year. (c) Prepare the cash budget for the next year. (d) Comment briefly on the liquidity situation which you feel should be drawn to the attention of the management. Recommend how the management could reduce the negative cash balance(s), if any.