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Garden Sales, Inc, 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: Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense" Total selling and administrative expenses Net operating income April May June July $530,000 $1,250,000 $ 510,680 5 410,888 371,000 735,000 357,000 287,880 159,000 315,000 153,000 123,88 101,000 100,000 61,000 41,000 45,500 60,800 38,000 39,000 146,500 160,800 99,000 80,000 $ 12,500 $ 154,200 $ 54,000 S 43,630 Includes $23,000 of 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 $220,000, and March's sales totaled $250,000 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 $107,100 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 $74.200 1 Dividends of $30,000 will be declared and paid in April g. Land costing $38,000 will be purchased for cosh in May 1. Dividends of $30,000 will be declared and paid in April g. Land costing $38,000 will be purchased for cash in May. n. The cash balance at March 31 is $52,000, 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 $74,200 and accounts payable for inventory purchases at March 31 remains $107100 Required: 1. 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 2. Using the president's new assumptions in (b) above, prepare the following for merchandise inventory: 3. 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 Complete this question by entering your answers in the tabs below. 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 106,000 $ 210,000 $102,000 $ 418,000 June Quarter Cash sales S Sales on account 35,200 140,000 42,400 February March April May June Total cash collections 40.000 296,800 84.000 * 84,800 3 588,000 40.800 S815,600 35 200 180,000 424,000 672,000 40.800 $ 1.770.000 $ 323.600 S 630.800 Required 2A > Required 1 Required A 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 Budgeted cost of goods sold 371 000 735,000 357.000 Add Desired ending merchandise 147,000 71,400 57,400 inventory Total needs 518,000 806,400 Less: Beginning merchandise inventory 74.200 147,000 70,000 S Required inventory purchases 659.400 344.400 414,400 443 800 Complete this question by entering your answers in the tabs below. Required 1 Required 2A Refuired 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 Beginning accounts payable 107,100 $ 107,100 April purchases 221,900 221,900 443,800 May purchases 329,700 329,700 659 400 June purchases 172 200 172,200 Total cash disbursements 329,000 $ 551.600 $ 501.900 1,382,500 S Garden Sales, Inc. Cash Budget For the Quarter Ended June 30 April May June Quarter Beginning cash balance 52.000 $ 40,000 $ 40,000 $ 52.000 Add collections from customers Total cash available 52,000 40,000 40,000 52,000 Less cash disbursements: Purchases for inventory 329,000 551,600 501,900 1,382,500 Selling expenses 101,000 100,000 61,000 262,000 Administrative expenses 22,500 37,800 15,000 75,300 Land purchases 38,000 38.000 Dividends paid 30,000 Total cash disbursements 482,500 727,400 577,900 1,757.800 Excess (deficiency) of cash available over disbursements (430,500) (687400) (537.900) (1.705 800) Financing Borrowings 115,000 35.000 150,000 Repayment 0 (150.000) (150,000) Interest (4.150) 3 (4.150) Total financing 115.000 35.000 (154, 150 (4.150) Ending cash balance S (315,500) $ (652,400 S (692,050) L709.950 00 O