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 5 540,000 463.000 192.000 May 5.1.140,000 798.000 342,080 June $ 600.000 420.000 180.000 July $ 500,000 350,000 150,000 Sales cost of goods sold Gross margin Selling and administrative expenses Selling expense Administrative expense" Total selling and administrative expenses Net operating Incote "Includes $32,000 of depreciation each month 119,00 50.000 169,000 $ 23,000 109,000 68,000 177,000 $ 165,000 71.000 44,000 115,000 $ 65,000 50,000 48,000 98,000 $ $2,000 b. 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 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 9 Land costing $47.000 will be purchased for cash in May. n 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 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: 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 () 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 April, May, and June and for the quarter in total. 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 2B 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 Total needs Required Inventory purchases Required 1 Required 2A Requied 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 April purchases May purchases June purchases Total cash disbursements Required 1 Required 2A Required 28 Required 3 Using the president's new assumptions, prepare a cash budget for April, May, and Jung, 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 Less cash disbursements Purchases for inventory Soling expenses Administrative expenses Land purchases Dividends paid Total cash disbursements Total cash disbursements Excess (deficiency) of cash available over disbursements Financing Borrowings Ropayment Interest Total financing Ending cash balance