The company usually has to borrow money during this quarter to support peak sales of lawn care als garden supplies Management is planning its cash needs for the second quarter. 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 July Sales $ 600,000 $900,000 $500,000 $400,000 Cost of goods sold 420.000 630,000 350.000 280,000 Gross margin 180,000 270,000 150,000 120,000 Selling and administrative expenses Selling expense 79.000 120.000 62.000 51,000 Administrative expense 45,000 52.000 41,000 38.000 Total selling and administrative expenses 124,000 172.000 103,000 80.000 Not operating income $ 56,000 $98.000 $ 47,000 $31.000 June Includes $20,000 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 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 $200,000, and March's sales totaled $300,000 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 ..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 $84,000 1. Dividends of $49,000 will be declared and paid in April Land costing $16,000 will be purchased for cash in May n. The cash balance at March 31 is $52.000; the company must maintain a cash balance of atleast $40,000 at the end of each month The company has an agreement with a focal 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 end of the quarter Required: 1. Prepare a schedule of expected cash collections for April May, and June, and for the quarter in total Schedule of Expected Cash Collections April May June Quarter 48.000 180.000 Cash sales 100.000 5 6 2 W R C March de in the nach oftast 12.000 Then the were opened the company 10000 0 4000 0 0 100 000 300 Abovyand A June b. A schedule of expected cash disbursements for merchandise purchases for April May, and suns, and for the quarter in total Schedule of Expected Cash Disbursements for Merchandise Purchases April Quarter Beginning our payable $ April purchases May purchases June purchases Total cash disbursements $ $ OS 0$ 0 0 0 3. Prepare a cash budget for April May and June as well as in total for the quarter (Cush deficiency repayments and interest should be indicated by a minus sign) Quarter May 40.000 636.000 676.000 June 40 000 $ 700.000 780.000 52000 1.764.000 1.000 Garden Sales, Inc Cash Budget For the Quarter Ended June 30 April Beginning cash balance $ 52.000 5 Add collections from customers 368.000 Total cash available 420.000 Less cash disbursements Purchases for invento 357.000 Selling expenses 79.000 Administrative expenses 25.000 Land purchases Dividends paid 49.000 Total cash disbursements 510.000 Excess deficiency of cash available over disbursements 190.000 Finance Borrowing 190.000 Repayment 518.000 120.000 32.000 16.000 455.000 $2.000 21.000 78 000 15 538.000 56.000 10.000 1.734.000 50.000 150 000 130.000 400 180.000 4900 (194.900 57105 Total financing Ending cash balance 110.000 50.000 10000 40.000 $ 57.100 5 6
