Green Lawn Company sells garden supplies. Management is planning its cash needs for the second quarter. The following information has been assembled to assist in preparing a cash budget for the quarter: a. Budgeted monthly income statements for July to October are as follows: Sales Cost of goods sold Gross margin Less: Operating expenses: Selling expense Administrative expense* Total operating expenses Net income July $580,000 August $820,000 September $500,000 October $420,000 396,000 564,000 350,000 294,000 184,000 256,000 150,000 126,000 83,200 116,000 59,600 50,800 46,000 51,600 42,800 48,400 129,200 167,600 102,480 91,200 $ 54,800 $ 88,400 $ 47,600 $ 34,800 *Includes $10,000 in depreciation each month. b. Sales are 20% for cash and 80% on account c. Sales on account are collected over a three-month period in the following ratio: 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. May's sales totalled $260,000, and June's sales totalled $340,000. 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 June 31 for inventory purchases during June total $112,800. e. At the end of each month, inventory must be on hand equal to 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $79,200. f. Dividends of $47,200 will be declared and paid in July. g. Equipment costing $17,800 will be purchased for cash in August. h. The cash balance at June 30 is $51,600; the company must maintain a cash balance of at least $39,000 at all times. i. The company can borrow from its bank, as needed, to bolster the cash account. Borrowings and repayments must be in multiples of $1,000. Interest is due only when principal is repaid and is calculated on the amount of repayment for the duration of the time money was borrowed. All borrowings take place at the beginning of a month, and all repayments are made at the end of a month. The annual interest rate is 12%. Compute interest on whole months (1/12, 2/12, and so forth). Required: 1. Prepare a schedule of expected cash collections from sales for each of the months July, August, and September, and for the quarter in total. Green Lawn Company Schedule of Expected Cash Collections July August September Quarter Cash sales Sales on account: May June July August September Total cash collections $ $ 0 S 0 $ 0 2. Prepare the following for merchandise inventory: a. An inventory purchases budget for each of the months July, August, and September. Green Lawn Company Inventory Purchases Budget July August September Total needs