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: July $ April $ 460,000 322,000 138,000 May $ 990,000 693,000 297.000 June $ 440,000 308.000 132,000 340,000 238.000 102,000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense Total selling and administrative expenses Net operating income 89,000 42,000 131,000 7,000 94,000 56,000 150.000 147.000 55,000 34,400 89.400 42,600 34.000 32,000 66.000 36,000 $ $ $ $ *Includes $16.000 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; 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. February's sales totaled $160,000, and March's sales totaled $220,000. 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 $93,800. 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 $64,400. f. Dividends of $24,000 will be declared and paid in April. g. Land costing $32,000 will be purchased for cash in May. h. The cash balance at March 31 is $46,000; the company must maintain a cash balance of at least $40,000 at the end of each month. i. The company 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 The company's president is interested in knowing how reducing inventory levels and collecting accounts receivable sooner will impact the cash budget. He revises the cash collection and ending inventory assumptions as follows: a. Sales continue to be 20% for cash and 80% on credit. However, credit sales from April, May, and June are collected over a three-month period with 25% collected in the month of sale, 65% collected in the month following sale, and 10% in the second month following sale. Credit sales from February and March are collected during the second quarter using the collection percentages specified in the main section, b. The company maintains its ending inventory levels for April, May, and June at 15% of the cost of merchandise to be sold in the following month. The merchandise inventory at March 31 remains $64,400 and accounts payable for inventory purchases at March 31 remains $93,800. Required: 1. Using the president's new assumptions in (a) above, prepare a schedule of expected cash collections for April, May, and June and for the quarter in total. 2. Using the president's new assumptions in (b) above, prepare the following for merchandise inventory: a. A merchandise purchases budget for April, May, and June. b. A schedule of expected cash disbursements for merchandise purchases for April, May, and June and for the quarter in total. 3. Using the president's new assumptions, prepare a cash budget for April, May, and June, and for the quarter in total. Required 1 Required 2A Required 2B Required 3 Using the president's new assumptions in (a) above, prepare a schedule of expected cash collections for April, May, and June and for the quarter in total. Schedule of Expected Cash Collections April May June | $ 92,000 $ 198,000 $ 88,000 Quarter Cash sales $ 378,000 Sales on account: February March 25,600 123,200 36,800 April 158,400 257,600 79,200 25,600 281,600 368,000 633,600 35,200 1,722,000 73,600 554,400 35,200 751,200 May June Total cash collections | $ 277,600 $ 693,200 $ $ Required 1 Required 2A Required 2B Required 3 Using the president's new assumptions in (b) above, prepare the following for merchandise inventory, a merchandise purchases budget for April, May, and June. Merchandise Purchases Budget May June Budgeted cost of goods sold Add: Desired ending merchandise inventory Total needs Less: Beginning merchandise inventory April | $ 322,000 64,400 386,400 644,000 $ 693,000 138,600 831,600 64,400 $ 767,200 $ 440,000 88,000 528,000 138,600 $ 389,400 Required inventory purchases (257,600) Required 1 Required 2A Required 2B Required 3 Using the president's new assumptions in (b) above, prepare the following for merchandise inventory, a schedule of expected cash disbursements for merchandise purchases for April, May, and June and for the quarter in total. KIELIIIIIIIIIIIIIIIIIIII Schedule of Expected Cash Disbursements for Merchandise Purchases April May June Beginning accounts payable $ 32,200 | $ April purchases (128,800)| (128,800)| May purchases 383,600 383,600 June purchases Total cash disbursements $ (96,600) $ 254,800 $ 383,600 $ Quarter 32,200 (257,600) 767,200 541,800 Required 2A Required 3 > Required 1 Required 2A Required 2B Required 3 Using the president's new assumptions, prepare a cash budget for April, May, and June, and for the quarter in total. (Cash deficiency, 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 Beginning cash balance Add collections from customers Total cash available 000 Less cash disbursements: Purchases for inventory Selling expenses Administrative expenses Land purchases Dividends paid Total cash disbursements 0 0 0 Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayment Interest Total financing Ending cash balance 0 0 0 0 0 0 $ $ 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: July $ April $ 460,000 322,000 138,000 May $ 990,000 693,000 297.000 June $ 440,000 308.000 132,000 340,000 238.000 102,000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense Total selling and administrative expenses Net operating income 89,000 42,000 131,000 7,000 94,000 56,000 150.000 147.000 55,000 34,400 89.400 42,600 34.000 32,000 66.000 36,000 $ $ $ $ *Includes $16.000 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; 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. February's sales totaled $160,000, and March's sales totaled $220,000. 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 $93,800. 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 $64,400. f. Dividends of $24,000 will be declared and paid in April. g. Land costing $32,000 will be purchased for cash in May. h. The cash balance at March 31 is $46,000; the company must maintain a cash balance of at least $40,000 at the end of each month. i. The company 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 The company's president is interested in knowing how reducing inventory levels and collecting accounts receivable sooner will impact the cash budget. He revises the cash collection and ending inventory assumptions as follows: a. Sales continue to be 20% for cash and 80% on credit. However, credit sales from April, May, and June are collected over a three-month period with 25% collected in the month of sale, 65% collected in the month following sale, and 10% in the second month following sale. Credit sales from February and March are collected during the second quarter using the collection percentages specified in the main section, b. The company maintains its ending inventory levels for April, May, and June at 15% of the cost of merchandise to be sold in the following month. The merchandise inventory at March 31 remains $64,400 and accounts payable for inventory purchases at March 31 remains $93,800. Required: 1. Using the president's new assumptions in (a) above, prepare a schedule of expected cash collections for April, May, and June and for the quarter in total. 2. Using the president's new assumptions in (b) above, prepare the following for merchandise inventory: a. A merchandise purchases budget for April, May, and June. b. A schedule of expected cash disbursements for merchandise purchases for April, May, and June and for the quarter in total. 3. Using the president's new assumptions, prepare a cash budget for April, May, and June, and for the quarter in total. Required 1 Required 2A Required 2B Required 3 Using the president's new assumptions in (a) above, prepare a schedule of expected cash collections for April, May, and June and for the quarter in total. Schedule of Expected Cash Collections April May June | $ 92,000 $ 198,000 $ 88,000 Quarter Cash sales $ 378,000 Sales on account: February March 25,600 123,200 36,800 April 158,400 257,600 79,200 25,600 281,600 368,000 633,600 35,200 1,722,000 73,600 554,400 35,200 751,200 May June Total cash collections | $ 277,600 $ 693,200 $ $ Required 1 Required 2A Required 2B Required 3 Using the president's new assumptions in (b) above, prepare the following for merchandise inventory, a merchandise purchases budget for April, May, and June. Merchandise Purchases Budget May June Budgeted cost of goods sold Add: Desired ending merchandise inventory Total needs Less: Beginning merchandise inventory April | $ 322,000 64,400 386,400 644,000 $ 693,000 138,600 831,600 64,400 $ 767,200 $ 440,000 88,000 528,000 138,600 $ 389,400 Required inventory purchases (257,600) Required 1 Required 2A Required 2B Required 3 Using the president's new assumptions in (b) above, prepare the following for merchandise inventory, a schedule of expected cash disbursements for merchandise purchases for April, May, and June and for the quarter in total. KIELIIIIIIIIIIIIIIIIIIII Schedule of Expected Cash Disbursements for Merchandise Purchases April May June Beginning accounts payable $ 32,200 | $ April purchases (128,800)| (128,800)| May purchases 383,600 383,600 June purchases Total cash disbursements $ (96,600) $ 254,800 $ 383,600 $ Quarter 32,200 (257,600) 767,200 541,800 Required 2A Required 3 > Required 1 Required 2A Required 2B Required 3 Using the president's new assumptions, prepare a cash budget for April, May, and June, and for the quarter in total. (Cash deficiency, 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 Beginning cash balance Add collections from customers Total cash available 000 Less cash disbursements: Purchases for inventory Selling expenses Administrative expenses Land purchases Dividends paid Total cash disbursements 0 0 0 Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayment Interest Total financing Ending cash balance 0 0 0 0 0 0 $ $