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 May June July Sales $ 770, 090 $ 930,890 $ 630, 090 $ 540, 090 Cost of goods sold 539,060 651,800 441,206 378, 680 Gross margin 231, 060 279-800 189,209 162,080 Selling and administrative expenses: Selling expense 93, 060 112,890 74,090 54, 090 Administrative expense* 51,509 70,406 45, 890 51, 080 Total selling and administrative expenses 144,508 182 406 119,860 185,680 Net operating income $ 86, 508 $ 96,600 $ 69, 280 $ 57,909 "Includes $35,000 of depreciation each month. b. Sales are 20% for cash and 80% on account. c. Sales on account are collected over a three-month perlod 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 $295,000, and March's sales totaled $310,000. 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 $140.700. 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 $107,800. f. Dividends of $42,000 will be declared and pald In April. g. Land costing $50,000 will be purchased for cash In May. h. The cash balance at March 31 is $64,000; the company must maintain a cash balance of at least $40,000 at the end of each month. 1. 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.Prepare a cash budget for April, May, and June as well as in total for the quarter. (Cash deficiency, repayments and inter be indicated by a minus sign.) Garden Sales, Incorporated Cash Budget For the Quarter Ended June 30 April May June Quarter Beginning cash balance 64,000 206,000 % S 40,600 X 64.000 Add collections from customers 436,400 741,200 820,400 1,898,000 Total cash available 500,400 947.200 861,000 2,062,000 Less cash disbursements: Purchases for inventory 421,400 585,200 518,700 1,536,500 X Selling expenses 93,000 112.000 74,000 279,000 Administrative expenses 16,500 35,400 10.800 62,200 % Land purchases 50,000 Dividends paid 42,000 Total cash disbursements 672,800 782,600 603,500 1,877,700 Excess (deficiency) of cash available over disbursements (72.500) 164,600 257,500 184,300 Financing: Borrowings 39,000 x 66,000 X 105,000 X Repayment (105,000) X Interest 4,557 (X Total financing 39,000 38,000 0 4.557 Ending cash balance S (33,500) S 230,600 S 257,500 188,857