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 April-July are: Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense April May June $550,000 $750,000 $450,000 $350,000 385,000 525,000 315,000 245,000 165,000 225,000 135,000 105,000 July 25,000 95,000 56,000 35,000 42,500 $6,800 35,000 33,000 117,500 151,800 91,000 68,000 Total selling and administrative expenses Net operating income "Includes $17,000 of depreciation each month b. Sales are 20% for cash and 80% on account. $47,500 $ 73,200 $ 44,000 5 37,000 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 $165,000, and March's sales totaled $225,000 d. Inventory purchases are paid for within 15 days. Therefore, 50% of a month's 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 $101,500. 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 $77,000. f. Dividends of $25.000 will be declared and paid in Anril