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 June April $ 340,000 440,000 192.000 5.1.140,000 2298.00 342,000 $ 600.000 420,00 180,000 July $ 500,000 350.000 150.000 Sales Cost of goods sold Cross margin Selling and adeinistrative Expen Sellings Administrative pense Total selling and administrative tenses Het operating Income Includes $32,000 of depreciation each month 119.00 50,000 189.00 71,000 4200 los, 60,000 1000 $ 165,000 50,000 45,000 GU,000 $ 52,000 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 $280.000, and March's sales totaled $295,000 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 $127,400 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 $89.600. 1. Dividends of $39.000 will be declared and paid in April Land costing $47.000 will be purchased for cash in May h. The cash balance at March 31 is $61,000, 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 15 per month and for simplicity we will assume that interest is not compounded. The company wouldt os for as it is able repay the loan plus accumulated interest at the end of the quarter The companys presenti 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 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 $89,600 and accounts payable for inventory purchases at March 31 remains $127.400 Required: 1 Using the president's new assumptions in (a) 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 5. Aschedule 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 April, May, and June and for the quarter in total. Schedule of Expected Cash Collections April May June Quarter Cash sales 5 128.000 228 000 S 120.000 $475,000 Sales on account 44.800 165 200 51 200 February March April May June Total cash collections 47200 358 400 91,200 44.800 212.400 102.400 512,000 638,400 83 729,600 48 000 $ 48,000 903.800 S 2.022 800 389,200 s Y24.800 Required 1 Required 2A Required 28 Required 3 Using the president's new assumptions in (b) above, prepare the following for merchandise inventory, a merchandise purchases budget for April, May, and June. Merchandise Purchases Budget April May June S S Budgeted cost of goods sold 448,000 798,000 420.000 Add Desired ending merchandise inventory 159 600 84.000 70,000 Total needs 607 600 882.000 490,000 Less: Beginning marchandise inventory 89,600159,600 84.000 IS $ Required inventory purchases 518 000 722.400 406.000 3 Required 1 Required 2A Required 28 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 $ 127 400 $ 127.400 April purchases 259.000 259.000 518,000 May purchases 361 2003 361 2003 722.400 June purchases 203,000 203 000 Total cash disbursements S 386.400 5 620 200 5 564 200 $ 1570.800 May 40.8005 724.800 765.600 June Quarter 40.400 $ 61 000 908 8003 2.022 8003 949 200 2.083,800 Garden Sales. Incorporated Cash Budget For the Quarter Ended June 30 April Beginning cash balance s 610005 Add collections from customers 389 2003 Total cash available 450 200 Less cash disbursements Purchases for inventory 386 400 Selling expenses 119.000 Administrative expenses 18.000 Land purchases Dividends paid 30.000 562100 Total cash disbursements 1112 200 Excess deficiency of cash avaliable over disbursements Financing 1530008 Boron 620 2003 109,000 36.000 17 000 564 200 $ 71000 12000 1570 8003 299.000 66.000 47.000 39.000 2021 300 012200 047200 302 000 02900 200.000 153 000 $ 87000 Borrowings Repayment Interest Total financing Ending cash balance (240.000) (6 330) 246 330 55 670 240.000 240.000) (6.330 (630) 55 670 153,000 402800 87.000 40 400 $ $ 15 $