MiniCase_6_1358 Adams Garden Supplies Inc. sells gardening materials and equipment. Management is planning its cash needs for the second quarter. The company usually need to borrow money during this quarter to support peak sales of gardening equipment, which occur during February. The following information has been assembled to assist in preparing a cash budget for the quarter: Budgeted monthly absorption costing income statements for January to April 2022 are: The company's president is interested in knowing how reducing inventory levels and collecting accounts receivable sooner will impact the cash budget. 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 January, February, and March 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 November and December 2021 totaled $200,000, and $300,000 d. respectively, and are collected during the second quarter using the collection percentages specied. . Cost of Goods Sold in the above statement represents cost of inventory. The company maintains its ending inventory levels for January, February, and March at 15% of the cost of merchandise to be sold in the following month. The merchandise inventory on January 1 remains $84,000 and accounts payable for inventory purchases on January 1 remains $126,000. Inventory purchases are paid in two instalments. Fifty percent of a month's inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month Dividends of $56,000 will be declared and paid in January. e. A delivery van costing $36,000 will be purchased for cash in February. f. The cash balance on March 31 is $42,000; 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. Required: 1. Using the president's new assumptions, prepare a schedule of expected cash collections for January, February, and March and for the quarter in total. 2. Using the president's new assumptions, prepare the following for merchandise inventory: a. A merchandise purchases budget for January, February, and March. b. A schedule of expected cash disbursements for merchandise purchases for January, February, and March and for the quarter in total