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 Budgeted monthly absorption costing income statements for AprilJuly are April May June July Sales $ 520,000 $ 720,000 $ 420,000 $ 320,000 Cost of goods sold 364,000 504,000 294,000 224,000 Gross margin 156,000 216,000 126,000 96,000 Selling and administrative expenses Selling expense 72,000 92,000 53,000 32,000 Administrative expense 41,000 54,400 33,200 30,000 Total selling and administrative expenses 113,000 146,400 86,200 62,000 Net operating income $ 43,000 $ 69,600 $ 39,800 $ 34,000 Includes $14,000 of depreciation each month Sales are 20 for cash and 80 on account 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 Februarys sales totaled $150,000, and Marchs sales totaled $300,000 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 is paid in the following month Accounts payable at March 31 for inventory purchases during March total $120,400 Each months 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 $72,800 Dividends of $22,000 will be declared and paid in April Land costing $30,000 will be purchased for cash in May The cash balance at March 31 is $44,000 the company must maintain a cash balance of at least $40,000 at the end of each month 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 Required 1 Prepare a schedule of expected cash collections for April, May, and June, and for the quarter in total 2 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 Prepare a cash budget for April, May, and June as well as in total for the quarter Brewer 8e Rechecks 2018 11 16

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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

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:

Budgeted monthly absorption costing income statements for AprilJuly are:

	April		May		June		July
Sales	$	520,000	$	720,000	$	420,000	$	320,000
Cost of goods sold		364,000		504,000		294,000		224,000
Gross margin		156,000		216,000		126,000		96,000
Selling and administrative expenses:
Selling expense		72,000		92,000		53,000		32,000
Administrative expense*		41,000		54,400		33,200		30,000
Total selling and administrative expenses		113,000		146,400		86,200		62,000
Net operating income	$	43,000	$	69,600	$	39,800	$	34,000

*Includes $14,000 of depreciation each month.

Sales are 20% for cash and 80% on account.
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. Februarys sales totaled $150,000, and Marchs sales totaled $300,000.
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% is paid in the following month. Accounts payable at March 31 for inventory purchases during March total $120,400.
Each months 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 $72,800.
Dividends of $22,000 will be declared and paid in April.
Land costing $30,000 will be purchased for cash in May.
The cash balance at March 31 is $44,000; the company must maintain a cash balance of at least $40,000 at the end of each month.
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.