Case Number One:

"GrowMaster Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firms marketing director, has completed the following sales forecast."

Month	Sales	Month	Sales
January	$900,000	July	$1,150,000
February	$1,000,000	August	$1,500,000
March	$900,000	September	$1,600,000
April	$1,100,000	October	$1,600,000
May	$850,000	November	$1,500,000
June	$950,000	December	$1,700,000

• Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. He has gathered the following information.
• All sales are made on credit.
• GrowMasters excellent record in accounts receivable collection is expected to continue, with 60% of sales collected in the month after sale and the remaining 40 percent collected two months after the sale.
• Inventory purchased in the months of April, May and June are $495,000, $382,500 and $427,500 respectively.
• All purchases are made on account. Historically, 75% of accounts payable have been paid during the month of purchase, and the remaining 25% in the month following purchase.
• Hourly wages and fringe benefits, estimated at 30% of the current months sales, are paid in the month incurred.
• General and administrative expenses are projected to be $1,473,000 for the year. A breakdown of the expenses follows. All expenditures are paid monthly throughout the year, with the exception of property taxes, which are paid in four equal installments at the end of each quarter. (divide each expense by 12 to get the monthly expenditure, except property taxes which should be divided by 4 to get quarterly taxes).

Salaries and fringe benefits	$315,000
Advertising	360,000
Property Taxes	80,000
Insurance	192,000
Utilities	180,000
Depreciation	346,000
Total	$1,473,000

• GrowMaster maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 12% line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $50,000.

Required:

1. Prepare the cash receipts budget for the second quarter. (3)
2. Prepare the cash payments budget for the second quarter. (3)
3. Prepare the cash budget for the second quarter. (4)