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 AprilJuly are:

	April		May		June		July
Sales	$	660,000	$	780,000	$	269,000	$	440,000
Cost of goods sold		462,000		546,000		188,300		308,000
Gross margin		198,000		234,000		80,700		132,000
Selling and administrative expenses:
Selling expense		84,000		113,000		31,500		44,000
Administrative expense*		47,000		78,200		29,800		42,000
Total selling and administrative expenses		131,000		191,200		61,300		86,000
Net operating income	$	67,000	$	42,800	$	19,400	$	46,000

*Includes $18,500 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; 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. Februarys sales totaled $165,000, and Marchs sales totaled $265,000.
d.	Inventory purchases are paid for within 15 days. Therefore, 50% of a months 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 $120,400.
e.	Each months 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 $92,400.
f.	Dividends of $33,000 will be declared and paid in April.
g.	Land costing $41,000 will be purchased for cash in May.
h.	The cash balance at March 31 is $55,000; the company must maintain a cash balance of atleast $40,000 at the end of each month.
i.	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 end of the quarter.

Required:
1.	Prepare a schedule of expected cash collections for April, May, and June, and for the quarter in tota

3. Prepare a cash budget for April, May, and June as well as in total for the quarter. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Garden Sales, Inc Cash Budget For the Quarter Ended June 30 April May June Quarter Beginning cash balance Add collections from customers Total cash available Less cash disbursements 55,000 $40,30062,370 $ 359,600 414,600 55,000 630,400 670,700 617,720 680,090 55,000 343,350 31,500 11,300 Purchases for inventory Selling expenses Administrative expenses Land purchases Dividends paid Total cash disbursements Excess (deficiency) of cash available over disbursements 359,800 84,000 28,500 476,630 113,000 59,700 (41,000) (41,000) 33,000 505,300 (90,700) 608,330 386,150 (41,000) 62,370 293,940 14,000 Financing Borrowings Repayment Interest 131,000 (131,000) (3,930) (134,930) 131,000 (131,000) (3,930) (3,930) 10,070 Total financing Ending cash balance 131,000 $40,300 62,370$159,010$