Chapter 8 HW Sever 00 Help Save & Exit Subna Check my work 10 points 1 Print Problem 8-25 (Static) Cash Budget with Supporting Schedules; Changing Assumptions [LO8-2, LOB-4, LO8-8] 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: May June July April $600,000 $900,000 $500,000 $400,000 420,000 638,000 350,000 280,000 180,000 270,000 150,000 120,000 Mc References Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expenses Total selling and administrative expenses Net operating income *Includes $20,000 of depreciation each month. b. Sales are 20% for cash and 80% on account. 79,000 120,000 62,800 51,000 45,000 124,000 52,000 172,000 41,008 103,000 38,000 89,000 $ 56,000 $ 98,000 $ 47,000 5 31,000 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 $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 March 31 for inventory purchases during March total $126,000. 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 $84,000. f Dividends of $49,000 will be declared and paid in April. 9. Land costing $16,000 will be purchased for cash in May h. The cash balance at March 31 is $52,000; the company must maintain a cash balance of at least $40,000 at the end of each month. L. 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 secuma that interact le not enmnnunded The comnanu wuild a far as it is shle renau the Inan nie arnimdatart intact at the 1 of 15 Graw H