Gorden Soles, incoppocated, usualy has to borrow money duting the second quarter to support peak sales of lawn care equipment during May, it gathered the folowing information to presore a cash budget for the quarter: a. Budgeted montily absorption costing income stanements for April-July ave: b. Soles are 20f for cash and bots on account. c. Soles on accourt are colected over a three-month peciod weth tors collected in the month of sale. 70s collected in moets of sale. February's sales totaled $175,000, and March's sules totaled $230,000. d. Wvemory punchases are pold for within 15 dars. Therefore, 501 , of a month's invembery purchases are paid for in the monen of purchase. The remaining sos ave paid in the foliowing moneh. Accounts payble at March 3i for invemary purchases duatiog March total $98,000. e. Cach month's ending imventory must equal 201 of the cost of the meichandise to be sold in the following month. The metchandise inventery of March 31 is $67200. t. Dividends of $26.000 will be declared and paid in Aoral 2. Land cosing \$34,000 wa be purchased for cash in Mary. h. The Cash belance at March 31 is $48,000; the company must mointain a cash belance 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 bonow in increments of $1000 at the beginning of each month, up to a total loan bolance of $200.000. The interest rate on these ioans is thi per month, and for simplicity we will astume interest is not sompounded. The cempany would, as for as in is able, repay the laten plus accumlined interest in the end of the quanet. The company's president is imterested in knowing how reducing invertory levels and collecting accouns receivable sooner will impact the cash budpet. He revises the cash collection and ending inventory assumptions as follows: a. Sales continue to be 20x for cash and 805 on credit. Howevec, credit sales from Aont, May, and June are collected over a three-month period wth 25% collected in the month of sale. 65% collected in the month following sale. and sots in the second motth following sale, Credit sales from February and March are coltected daring the second quarter using the coltection perceratapes speciffed in the main section. b. The company maintains is ending inventory levels for April, Maxk and June at 15x of Eecest of merchandise to be sold in the following month. The merchandise invertory at Mach 31 remains $67,200 and accounts payable for inventory purchases at March 31 remains $96000 Required: 1. Using the president's new assumptions in (a) above. prepare a schedule of expected cash collections for April. May. and juhe and for the quarter is totat. 2. Using the president's new arsumptions in (a) above, prepare the following for menchandise invertocy. a. A merchandise purchases budpet for Apri, Mass and June. b. A schedule of expected cash disbursements for merchandse purchases for Apn, May, and June and for the quarter in total. 3. Using the presideor's new assumptions, prepare o cash budget for Apre. May, and Juhe, and for the quarter in lotal. 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
