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 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 April-July are Sales Cost of goods sold Gross margin Selling and administrative expenses Seling expense Administrative expense Total selling and administrative expenses Net operating income "includes $10,000 of depreciation each month b. Sales are 20% for cash and 80% on account April May June July $560,000 $700,000 $400,000 $360.000 392.000 532.000 322 000 252.000 168.000 2220.000 130.000 76,000 96.000 57,000 36.000 43.000 57.000 35.000 34.000 119,000 $49.000 155.000 92.650 70.000 74.400 45,400 $ 30.000 c. Sales on account are collected over a three-month penod with 10% collected in the month of sale 80% collected in the first month following the month of sale and the remaining 10% colected in a the second month following the month of sale. February's sales totaled $175,000, and March's sales totaled $230,000 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 folowing monm Accounts payable at March 31 for inventory purchases during March total $103.600 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 578.400 g Dividends of $26,000 will be declared and paid in Apri Land costing $34,000 wil be purchased for cash in May n. The cash balance at March 31 is $40,000; the company must mantan a cash balance of at least $40,000 at the end of each month The company has an agreement with a local bank that adows 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 plis accumulated interest at the end of the quarter