et Assignment i Seved Problem 7-5 Preparing a Cash Budget with Supporting Schedules (LO2- CC5, 7, 12) Garden Sales, Inc. sells garden supplies. Management is planning its cash needs for the second quarter. The following information has been assembled to assist in preparing a cash budget for the quarter: a. Budgeted monthly income statements for April to July are as follows: May June July Sales April $590,000 $830,000 $510,000 Cost of goods sold $430,000 301,000 402,000 570,000 357,000 Gross margin 188,000 260,000 153,000 129,000 Less: Operating expenses: Selling expense 85,200 118,000 60,600 51,800 47,000 52,900 43,800 41,400 Administrative expense Total operating expenses Net income 132,200 170,900 104,400 93,200 $ 55,800 $ 89,100 $ 48,600 $35,800 "Includes $10,000 in depreciation each month. b. Sales are 20% for cash and 80% on account. c. Sales on account are collected over a three-month period in the following ratio: 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 totalled $270,000, and March's sales totalled $350,000. 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 $114,000. e. At the end of each month, inventory must be on hand equal to 20% of the cost of the merchandise to be sold in the following month. The merchandise Inventory at March 31 is $80,400. 1. Dividends of $47.900 will be declared and paid in April. g. Equipment costing $18,300 will be purchased for cash in May. h. The cash balance at March 31 is $52.600; the company must maintain a cash balance of at least $40,000 at all times. es cation.com udget Assignment Connect get Assignment Seved 1. The company can borrow from its bank, as needed, to bolster the cash account. Borrowings and repayments must be in multiples of $500. Interest is due only when principal is repaid and is calculated on the amount of repayment for the duration of the time money was borrowed. All borrowings take place at the beginning of a month, and all repayments are made at the end of a month. The annual interest rate is 12%. Compute interest on whole months (1/12, 2/12, and so forth). Required: 1. Prepare a schedule of expected cash collections from sales for each of the months April, May, and June, and for the quarter in total. GARDEN SALES, INC. Schedule of Expected Cash Collections April May June Quarter $ 118,000 $ 166,000 $ 102,000 $ 386,000 t Cash sales Sales on account February March April May June Total cash collections $ 118,000 $ 166,000 $102,000 $386,000 2. Prepare the following for merchandise inventory: a. An inventory purchases budget for each of the months April, May, and June. 2. Prepare the following for merchandise inventory: a. An inventory purchases budget for each of the months April, May, and June. GARDEN SALES, INC. Inventory Purchases Budget April May June ces Total needs b. A schedule of expected cash disbursements for inventory for each of the months April, May, and June, and for the quarter in total. b. A schedule of expected cash disbursements for inventory for each of the months April, May, and June, and for the quarter in total. ook GARDEN SALES, INC. Schedule of Expected Cash Disbursements for Inventory int April May June Quarter rences Accounts payable, March 31 April purchases May purchases June purchases Total cash disbursements $ 0 $ 0 $ 0 $ 0 education.com 07-Budget Assignment-Connect Budget Assignment Saved 3. Prepare a cash budget for the third quarter, by month as well as in total for the quarter. Show borrowings from the company's bank and repayments to the bank, as needed, to maintain the minimum cash balance. (Roundup "Borrowing" and "Repayments" answers to the nearest whole dollar amount. Any "Repayments" and "Interest" should be indicated by a minus sign.) 4 GARDEN SALES, INC. Cash Budget For the Quarter Ended June 30 April May June Quarter ook Total cash available nnt Deduct Disbursements rences Total disbursements Excess (deficiency) of cash Financing Total financing 0 0 0 0 0 0 900