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 $ 730,000 $ 910,000 $ 610,000 $ 520,000 Cost of goods sold 511,000 637,000 427,000 364,000 Gross margin 219,000 273,000 183,000 156,000 Selling and administrative expenses Selling expense 91,000 110,000 72,000 52,000 Administrative expense 50,500 68,800 44,600 49,000 Total selling and administrative expenses 141,500 178,800 116,600 101,000 Net operating income $ 77,500 $ 94,200 $ 66,400 $ 55,000 Includes $33,000 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 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 Februarys sales totaled $285,000, 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 $135,100 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 $102,200 Dividends of $40,000 will be declared and paid in April Land costing $48,000 will be purchased for cash in May The cash balance at March 31 is $62,000 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 Required 1 Required 2A Required 2B Required 3 Prepare a schedule of expected cash collections for April, May, and June, and for the q Schedule of Expected Cash Collections April May June Quarter Cash sales Sales on account February March April May June Total cash collections Required 1 Required 2A Required 1 Required 2A Required 2B Required 3 Prepare the following for merchandise inventory, a merchandise purchases budget for Ap Merchandise Purchases Budget April May June Total needs Required inventory purchases Required 1 Required 2A Required 2B Required 3 Prepare the following for merchandise inventory, a schedule of expected cash disbursements for mercha April, May, and June, and for the quarter in total Schedule of Expected Cash Disbursements for Merchandise Purchases April May June Quarter April purchases May purchases June purchases Total cash disbursements UC TUCULLU YU 1111 iyul 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 Less cash disbursements Purchases for inventory Selling expenses Administrative expenses Land purchases Dividends paid T Total cash disbursements Excess (deficiency) of cash available over disbursements Financing Borrowings Repayment Interest D D Total financing Ending cash balance Required 2B Required 3

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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	$	730,000	$	910,000	$	610,000	$	520,000
Cost of goods sold		511,000		637,000		427,000		364,000
Gross margin		219,000		273,000		183,000		156,000
Selling and administrative expenses:
Selling expense		91,000		110,000		72,000		52,000
Administrative expense*		50,500		68,800		44,600		49,000
Total selling and administrative expenses		141,500		178,800		116,600		101,000
Net operating income	$	77,500	$	94,200	$	66,400	$	55,000

*Includes $33,000 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; 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. Februarys sales totaled $285,000, 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 $135,100.
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 $102,200.
Dividends of $40,000 will be declared and paid in April.
Land costing $48,000 will be purchased for cash in May.
The cash balance at March 31 is $62,000; 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.

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Required 1 Required 2A Required 2B Required 3 Prepare a schedule of expected cash collections for April, May, and June, and for the q Schedule of Expected Cash Collections April May June Quarter Cash sales Sales on account: February March April May June Total cash collections Required 1 Required 2A > Required 1 Required 2A Required 2B Required 3 Prepare the following for merchandise inventory, a merchandise purchases budget for Ap Merchandise Purchases Budget April May June Total needs Required inventory purchases Required 1 Required 2A Required 2B Required 3 Prepare the following for merchandise inventory, a schedule of expected cash disbursements for mercha April, May, and June, and for the quarter in total. Schedule of Expected Cash Disbursements for Merchandise Purchases April May June Quarter April purchases May purchases June purchases Total cash disbursements UC TUCULLU YU 1111 iyul 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 Less cash disbursements: Purchases for inventory Selling expenses Administrative expenses Land purchases Dividends paid - T Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayment Interest D D Total financing Ending cash balance Required 2B Required 3 >