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 April $ 630, eee 441,000 189,eee May $ 1,138,eee 791,600 339.000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense" Total selling and administrative expenses Net operating income "Includes $31,000 of depreciation each month June $ 590,000 413, eee 177,eee July $ 490,00 343, eee 147. eee 117, 49,500 166,500 $ 22,500 188, eee 67. 2ee 175,200 $ 163, see 70,eee 43,400 113,460 $ 63,6ee 49,000 47,000 96,000 $ 51,00 Check my work 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 $275,000, and March's sales totaled $290,000 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 $125,300 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 $88,200. f Dividends of $38,000 will be declared and paid in April g. Land costing $46,000 will be purchased for cash in May. h. The cash balance at March 31 is $60,000, the company must maintain a cash balance of at least $40,000 at the end of each month. L. 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 Check my work 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 $88,200 and accounts payable for inventory purchases at March 31 remains $125,300 Required: 1. Using the president's new assumptions in (e) 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 A and for the quarter in total. Schedule of Expected Cash Collections April May June Quarter $ 630,000 $ 1,130,000 $ 590,000 $ 2,350,000 Cash sales Sales on account: February March April May June 44.000 162,400 126,000 46,400 327,000 226,000 44,000 208,800 50,400 503,400 587,600 813,600 118,000 118,000 1,346,000 $ 4,037,800 Total cash collections $ 962,400 $ 1,729,400 $ Required 1 Required 2A Required 2B Required 3 Using the president's new assumptions in (b) above, prepare the following for merchandise inventory purchases budget for April, May, and June. Merchandise Purchases Budget April May June Budgeted cost of goods sold $ 441,000 $ 791,000 $ 413,000 Add: Desired ending merchandise inventory Total needs 441,000 791,000 413,000 Less: Beginning merchandise inventory Required inventory purchases $ 441,000 $ 791,000 $ 413,000 Check m 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 Schedule of Expected Cash Disbursements for Merchandise Purchases April May June Quarter Beginning accounts payable $ 125,300 $ 125,300 April purchases 0 May purchases 0 June purchases 0 Total cash disbursements $ 125,300 $ 0 $ 0 $ 125,300 Check my work 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, Incorporated 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 Less cash disbursements Purchases for inventory Selling expenses Administrative expenses Land purchases Dividends paid TI Chec Selling expenses Administrative expenses Land purchases Dividends paid Total cash disbursements 0 0 0 0 0 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 $ 0 $ 0