3. value: 4.00 points Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter. a. Budgeted monthly absorption costing income statements for April-July are: April $ 550,000 385,000 165,000 May $750,000 525,000 2 25,000 June S 450.000 315.000 135,000 July $ 350,000 245.000 105.000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense* Total selling and administrative expenses Net operating income 75,000 42,500 117,500 $ 47,500 95.000 56,800 151 800 $ 73,200 56.000 35 000 91,000 S 44,000 35.000 33,000 68,000 $ 37,000 *Includes $17,000 of depreciation each month. 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; 80% collected in the first month following the month of sale, and the remaining 10% collected in the second month following the month of sale. February's sales totaled $165,000 and March's sales totaled $225,000 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% is paid in the following month. Accounts payable at March 31 for inventory purchases during March total $101,500. 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 $77,000. f Dividends of S25,000 will be declared and paid in April. g. Land costing S33,000 will be purchased for cash in May. h. The cash balance at March 31 is $47,000; the company must maintain a cash balance of at least $40,000 at the end of each month. 1. 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 assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the