Garden Sales, Incorporated, 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 Total selling and administrative expenses Net operating income. "Includes $24,000 of depreciation each month. April $620,000 May $810,000 June $520,000 July $420,000 434,000 567,000 364,000 294,000 186,000 243,000 156,000 126,000 82,000 101,000 63,000 42,000 46,000 61,600 38,600 40,000 128,000 162,600 101,600 82,000 $ 58,000 $ 80,400 $ 54,400 $ 44,000 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 $230,000, and March's sales totaled $255,000. 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 $114,800. 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 $86,800. f. Dividends of $31,000 will be declared and paid in April. g. Land costing $39,000 will be purchased for cash in May. h. The cash balance at March 31 is $53,000; 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. Required 1 Required 2A Required 28 Required 3 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, Incorporated Cash Budget Beginning cash balance Add collections from customers Total cash available Less cash disbursements: Purchases for inventory Selling expenses Administrative expenses Land purchases For the Quarter Ended June 30 April May June Quarter $ 53,000 $ 40,100 40,800 $ 53,000 353,200 614,800 698,400 1,666,400 406,200 654,900 739,200 1,719,400 345,100 493,500 438,200 1,276,800 82,000 101,000 63,000 246,000 22,000 37,600 14,600 74,200 00 39,000 0 39,000 Dividends paid 31,000 0 0 31,000 Total cash disbursements 480,100 671,100 515,800 1,667,000 Excess (deficiency) of cash available over disbursements (73,900) (16,200) 223,400 52,400 Financing Borrowings: 114,000 57,000 00 171,000 ( Repayment 0 (171,000) (171,000) Interest Total financing Ending cash balance 0 0 0 114,000 57,000 (171,000) 0 40,100 $ 40,800 52,400 $ 52,400