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: 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. Sales are 20% for cash and 80% on account. 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. 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. 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. Dividends of $40,600 will be declared and paid in April. Equipment costing $13,800 will be purchased for cash in May. The cash balance at March 31 is $43,600; the company must maintain a cash balance of at least $31,000 at all times. 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. 2. Prepare the following for merchandise inventory: a. An inventory purchases budget for each of the months April, May, and June. b. A schedule of expected cash disbursements for inventory for each of the months April, May, and June, and for the quarter in total. 3. Prepare a cash budget for the third quarter, by month as well as in total for the quarter. Show borrowings from the companys 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.)