2 10 points eBook Print References Garden Sales, Incorporated, usually has to borrow money during the second quarter to support peak sales of lawn care equipment during May. It gathered the following information to prepare a cash budget for the quarter: a. Budgeted monthly absorption costing income statements for April-July are: Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense* Total selling and administrative expenses Net operating income *Includes $34,000 of depreciation each month. April $ 660,000 462,000 198,000 123,000 51,000 174,000 $ 24,000 May $ 1,160,000 812,000 348,000 111,000 69,600 180,600 $ 167,400 June $ 620,000 434,000 186,000 73,000 45,200 118, 200 $$7,800 July $530,000 371,000 159,000 53,000 50,000 103,000 $ 56,000 b. Sales are 20% for cash and 80% on account. c. Sales on account are collected over a three-month period with 10% collected in the month of sale, 70% collected in the first month following the month of sale, and the remaining 20% collected in the second month following the month of sale. February's sales totaled $290,000, and March's sales totaled $305,000. d. Inventory purchases are paid for within 15 days. Therefore, 50% of a month's inventory purchases are paid for in the month of purchase. The remaining 50% are paid in the following month. Accounts payable at March 31 for inventory purchases during March total $131,600. e. Each month's ending inventory must equal 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at March 31 is $92,400. f. Dividends of $41,000 will be declared and paid in April. g. Land costing $49,000 will be purchased for cash in May. h. The cash balance at March 31 is $63,000; the company must maintain a cash balance of at least $40,000 at the end of each month. i. 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 $200,000. The interest rate on these loans is 1% per month, and for simplicity we will TL- L 2_L 1111

Garden Sales, Incorporated, usually has to borrow money during the second quarter to support peak sales of lawn care equipment during May, it gathered the following informotion to prepare a cash budget for the quarter: a. Eudgeted monthly absorption costing income statements for April-July are: b. Sales are 20% tor cash and 80% on occount. c. Sales on occount ore collected over a three-month period with 10% collected in the month of sole, 70x collectied in the first month following the month of sale, and the remaining 20% collected in the second month following the month of sale. February's sales totaled \$290,000, and March's sales totaled \$305,000. d. imventory purchoses are pald for within 15 days. Thetefore, Sow of a moath's inventory purchases are pald for in the month of purchose. The remaining 50% are paid in the following month. Accounts payable at March 31 foe inventory purchases during March total $131.600. . Farh mamth's ending inventory must equal 20% of the cost of the merchandise to be sold in the following month, ne merchandise inventory at March 31 is $92.400. L. Dividends of $44,000 wil be declared and paid in April. a. Land costing $49,000 wil be purchased for cosh in Mny. i. The cash balance at March 31 is $53,000; the company must maintain a cash balance of ar least $40,000 at the end of each month. i. The company has an aoreement with a focal bank that aliows the company to borrow in increments of 51,000 at the beginning of each month, up to a total Joan bolance of $200.000, The interest rate on these loans is 15 per month and for simplicity we will