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 occurs during May. The following information has been assembled to assist in preparing a cash budget for the quarter:
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Budgeted monthly absorption costing income statements for AprilJuly are:
1) Prepare a cash budget for April, May, and June as well as in total for the quarter.
Show me how to find the interest and quarter beginning cash balance, please.
April May $530,000 $ 730, eee 371, 511,00 159, eee 219,eee June $ 430, eee 301,00 129,00 July $ 330, eee 231,000 99, eee Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense* Total selling and administrative expenses Net operating income 73,00 41,500 114.599 44,500 93,000 55,200 148.299 79,800 54,00 33,800 87.809 41,200 33,000 31,00 64.999 35,00 $ $ $ *Includes $15,000 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: 80% collected in the first month following the month of sale, and the remaining 10% collected in the second month following the month of sale. February's sales totaled $155,000, and March's sales totaled $215,000. d. Inventory purchases are paid for within 15 days. Therefore, 50% of a purchase. The remaining 50% is paid in the following month. Accounts payable at March 31 for Inventory purchases during March total $97,300. 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 $74,200. f. Dividends of $23,000 will be declared and paid In April. g. Land costing $31,000 will be purchased for cash In May. h. The cash balance at March 31 is $45,000, the company must maintain a cash balance of at least $40,000 at the end of each month. 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. Garden Sales, Inc. Cash Budget For the Quarter Ended June 30 April $ 45,000 $ 298.400 343.400 Beginning cash balance $ May 40,100 560.800 800.900 June 40.700 630.000 670.700 Quarter $ 125.800 X 1.489.200 1.615.000 Add collections from customers Total cash available Less cash disbursements: Purchases for inventory Selling expenses Administrative expenses 296.800 73.000 26,500 434.000 93.000 40.200 31.000 Land purchases Dividends paid 378,000 54.000 18.800 0 0 450.800 219.900 1,108,800 220.000 85.500 31.000 23.000 1.468.300 146.700 23.000 419.300 Total cash disbursements Excess (deficiency) of cash available over disbursements 598,200 2.700 (75.900) Financing Borrowings 116.000 Repayment o Interest 38.000 0 0 38.000 40.700 0 116.000 40,100 (154.000) (2,700) X (156,700) 63200 154.000 (154,000) (2,700) 2.700) 144.000 Total financing Ending cash balance $ $ April May $530,000 $ 730, eee 371, 511,00 159, eee 219,eee June $ 430, eee 301,00 129,00 July $ 330, eee 231,000 99, eee Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense* Total selling and administrative expenses Net operating income 73,00 41,500 114.599 44,500 93,000 55,200 148.299 79,800 54,00 33,800 87.809 41,200 33,000 31,00 64.999 35,00 $ $ $ *Includes $15,000 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: 80% collected in the first month following the month of sale, and the remaining 10% collected in the second month following the month of sale. February's sales totaled $155,000, and March's sales totaled $215,000. d. Inventory purchases are paid for within 15 days. Therefore, 50% of a purchase. The remaining 50% is paid in the following month. Accounts payable at March 31 for Inventory purchases during March total $97,300. 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 $74,200. f. Dividends of $23,000 will be declared and paid In April. g. Land costing $31,000 will be purchased for cash In May. h. The cash balance at March 31 is $45,000, the company must maintain a cash balance of at least $40,000 at the end of each month. 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. Garden Sales, Inc. Cash Budget For the Quarter Ended June 30 April $ 45,000 $ 298.400 343.400 Beginning cash balance $ May 40,100 560.800 800.900 June 40.700 630.000 670.700 Quarter $ 125.800 X 1.489.200 1.615.000 Add collections from customers Total cash available Less cash disbursements: Purchases for inventory Selling expenses Administrative expenses 296.800 73.000 26,500 434.000 93.000 40.200 31.000 Land purchases Dividends paid 378,000 54.000 18.800 0 0 450.800 219.900 1,108,800 220.000 85.500 31.000 23.000 1.468.300 146.700 23.000 419.300 Total cash disbursements Excess (deficiency) of cash available over disbursements 598,200 2.700 (75.900) Financing Borrowings 116.000 Repayment o Interest 38.000 0 0 38.000 40.700 0 116.000 40,100 (154.000) (2,700) X (156,700) 63200 154.000 (154,000) (2,700) 2.700) 144.000 Total financing Ending cash balance $ $
