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:

1. Budgeted monthly income statements for April to July are as follows:

	April				May				June				July
Sales	$	500,000			$	740,000			$	420,000			$	340,000
Cost of goods sold		348,000				516,000				294,000				238,000
Gross margin		152,000				224,000				126,000				102,000
Less: Operating expenses:
Selling expense		67,200				100,000				51,600				42,800
Administrative expense*		38,000				42,200				34,800				32,400
Total operating expenses		105,200				142,200				86,400				75,200
Net income	$	46,800			$	81,800			$	39,600			$	26,800

*Includes $20,000 in depreciation each month.

2. Sales are 20% for cash and 80% on account.
3. 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. Februarys sales totalled $180,000, and Marchs sales totalled $260,000.
4. 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% are paid in the following month. Accounts payable at March 31 for inventory purchases during March total $103,200.
5. 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 $69,600.
6. Dividends of $40,600 will be declared and paid in April.
7. Equipment costing $13,800 will be purchased for cash in May.
8. The cash balance at March 31 is $43,600; the company must maintain a cash balance of at least $31,000 at all times.
9. 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.

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 $ 100,000 $ 148,000 $ 84.000 Quarter $ 332,000 Cash sales Sales on account: February March April May June 28,800 28,800 145,600 41,600 187,200 8,000 56,000 16,000 80,000 11,840 82,880 94,720 6,784 6.784 $ 282,400 $ 257,440 $ 189,664 $ 729,504 Total cash collections 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 Actual cost of goods sold $ 348,000 $ 516,000 $ 294,000 Add: Desired ending inventory 69,600 103,200 58,800 Total needs 417,600 619,200 352,800 Deduct: Beginning inventory 69,600 69,600 103,200 Required inventory purchases $ 348,000 $ 549,600 $ 248,800 b. A schedule of expected cash disbursements for inventory for each of the months April, May, and June, and for the quarter in total. GARDEN SALES, INC. Schedule of Expected Cash Disbursements for Inventory April May June Quarter Accounts payable, March 31 $ 103,200 $ 103,200 April purchases 174,000 174,000 348,000 May purchases 274,800 274,800 June purchases 124,000 124,000 Total cash disbursements $ 277,200 $ 448,800 $ 398,800 $ 575,200 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.) GARDEN SALES, INC. Cash Budget For the Quarter Ended June 30 April May June Quarter 0 0 0 0 Total cash available Deduct: Disbursements: Purchases for inventory Selling expenses Administrative expenses Equipment purchases Dividends paid 277,200 67,200 448,800 100,000 398,800 51,600 575,200 218,800 Total disbursements 344,400 548,800 450,400 794,000 Excess (deficiency) of cash Financing: Total financing 0 0 0 0