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 $ 550,000 $ 750,000 $ 450,000 $ 350,000 Cost of goods sold 385,000 525,000 315,000 245,000 Gross margin 165,000 225,000 135,000 105,000 Selling and administrative expenses Selling expense 75,000 95,000 56,000 35,000 Administrative expense 42,500 56,800 35,000 33,000 Total selling and administrative expenses 117,500 151,800 91,000 68,000 Net operating income $ 47,500 $ 73,200 $ 44,000 $ 37,000 Includes $17,000 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 $165,000, and Marchs sales totaled $225,000 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 $101,500 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 $77,000 Dividends of $25,000 will be declared and paid in April Land costing $33,000 will be purchased for cash in May The cash balance at March 31 is $47,000 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 Complete this question by entering your answers in the tabs below Schedule of Expected Cash Collections April May June Quarter Cash sales Sales on account February March April May June Total cash collections 2A) Prepare the following for merchandise inventory, a merchandise purchases budget for April, May, and June Merchandise Purchases Budget April May June Budgeted cost of goods sold Add Desired ending merchandise inventory Total needs Less Beginning merchandise inventory Required inventory purchases 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 Schedule of Expected Cash Disbursements for Merchandise Purchases April May June Quarter $0 April purchases 0 May purchases 0 June purchases 0 Total cash disbursements $0 $0 $0 $0 Prepare a cash budget for April, May, and June as well as in total for the quarter (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 0 0 0 0 Less cash disbursements Purchases for inventory Selling expenses Administrative expenses Land purchases Dividends paid Total cash disbursements 0 0 0 0 Excess (deficiency) of cash available over disbursements 0 0 0 0 Financing Borrowings Repayment Interest Total financing 0 0 0 0 Ending cash balance $0 $0 $0 $0

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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	$	550,000	$	750,000	$	450,000	$	350,000
Cost of goods sold		385,000		525,000		315,000		245,000
Gross margin		165,000		225,000		135,000		105,000
Selling and administrative expenses:
Selling expense		75,000		95,000		56,000		35,000
Administrative expense*		42,500		56,800		35,000		33,000
Total selling and administrative expenses		117,500		151,800		91,000		68,000
Net operating income	$	47,500	$	73,200	$	44,000	$	37,000

Includes $17,000 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 $165,000, and Marchs sales totaled $225,000.
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 $101,500.
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 $77,000.
Dividends of $25,000 will be declared and paid in April.
Land costing $33,000 will be purchased for cash in May.
The cash balance at March 31 is $47,000; 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.

Complete this question by entering your answers in the tabs below.

Schedule of Expected Cash Collections
	April	May	June	Quarter
Cash sales
Sales on account:
February
March
April
May
June
Total cash collections

2A) Prepare the following for merchandise inventory, a merchandise purchases budget for April, May, and June.

Merchandise Purchases Budget
	April	May	June
Budgeted cost of goods sold
Add: Desired ending merchandise inventory
Total needs
Less: Beginning merchandise inventory
Required inventory purchases

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.

Schedule of Expected Cash Disbursements for Merchandise Purchases
	April	May	June	Quarter
				$0
April purchases				0
May purchases				0
June purchases				0
Total cash disbursements	$0	$0	$0	$0

Prepare a cash budget for April, May, and June as well as in total for the quarter. (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	0	0	0	0
Less cash disbursements:
Purchases for inventory
Selling expenses
Administrative expenses
Land purchases
Dividends paid
Total cash disbursements	0	0	0	0
Excess (deficiency) of cash available over disbursements	0	0	0	0
Financing:
Borrowings
Repayment
Interest
Total financing	0	0	0	0
Ending cash balance	$0	$0	$0	$0