Garden Sales, Incorporated, usually has $to$ borrow money during the second quarter $to$ support peak sales $of$ lawn care equipment during May. $It$ gathered the following information $to$ prepare a cash budget for the quarter:

Budgeted monthly $absorption$ costing income statements for April$-$July are:

April May June July Sales

$ $700,000$$ $870,000$$ $580,000$$ $480,000$

Cost $of$ goods sold $490,000609,000406,000336,000$

Gross margin $210,000261,000174,000144,000$

Selling and administrative expenses:

Selling expense $88,000107,00069,00048,000$

Administrative expense$*49,00066,40042,80046,000$

Total selling and administrative expenses $137,000173,400111,80094,000$

Net operating income $ $73,000$ $ $87,600$ $ $62,200$ $ $50,000$

$*Includes$ $$30,000of$ depreciation each month.

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 $$270,000,$ and March$s$ sales totaled $$285,000.$

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 $50\%$ are paid $in$ the following month. Accounts payable $at$ March $31$ for inventory purchases during March total $$128,800.$

Each month$s$ ending inventory must equal $20\%of$ the cost $of$ the merchandise $tobe$ sold $in$ the following month. The merchandise inventory $at$ March $31is$ $$98,000.$

Dividends $of$ $$37,000$ will $be$ declared and paid $in$ April.

Land costing $$45,000$ will $be$ purchased for cash $in$ May.

The cash balance $at$ March $31is$ $$59,000$; the company must maintain a cash balance $ofat$ least $$40,000at$ the end $of$ each month.

The company has $an$ agreement with a local bank that allows the company $to$ borrow $in$ increments $of$ $$1,000at$ the beginning $of$ each month, $upto$ a total loan balance $of$ $$200,000.$ The interest rate $on$ these loans $is1\%$ per month, and for simplicity $we$ will assume interest $is$ not compounded. The company would, $as$ far $asitis$ able, repay the loan plus accumulated interest $at$ the end $of$ the quarter.

Required:

Prepare a schedule $of$ expected cash collections for April, May, and June, and for the quarter $in$ total.

Prepare the following for merchandise inventory:

A merchandise purchases budget for April, May, and June.A schedule $of$ expected cash disbursements for merchandise purchases for April, May, and June, and for the quarter $in$ total.

Prepare a cash budget for April, May, and June $as$ well $asin$ total for the quarter.

Problem $8-24(Algo)$ Cash Budget with SupportIng Schedules $[LO8-2,LO8-4,LO8-8]$

Garden Sales, Incorporated, usually has $to$ borrow money during the second quarter $to$ support peak sales $of$ lawn care equipment

during May. $It$ gathered the following information $to$ prepare a cash budget for the quarter:

$a.$ Budgeted monthly $absorption$ costing income statements for April$-$July are:

$*Includes$ $$30,000of$ depreciation each month.

$b.$ 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 $$270,000,$ and March's sales totaled $$285,000.$

$d.$ 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 $50\%$ are paid $in$ the following month. Accounts payable $at$ March $31$ for inventory purchases during March

total $$128,800.$

$e.$ Each month's ending inventory must equal $20\%of$ the cost $of$ the merchandise $tobe$ sold $in$ the following month. The merchandise

inventory $at$ March $31is$ $$98,000.$

$f.$ Dividends $of$ $$37,000$ will $be$ declared and paid $in$ April.

$g.$ Land costing $$45\mathrm{.}000$ will $be$ purchased for cash $in$ May.

$h.$ The cash balance $at$ March $31is$ $$59,000$; the company must maintain a cash balance $ofat$ least $$40,000at$ the end $of$ each month.

$i.$ The company has $an$ agreement with a local bank that allows the company $to$ borrow $in$ increments $of$ $$1,000at$ the beginning $of$

each month, $upto$ a total loan balance $of$ $$200,000.$ The interest rate $on$ these loans $is1\%$ per month, and for simplicity $we$ will

assume interest $is$ not compounded. The company would Required $1$

$1.$ 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 $asin$ total for the quarter.