PROBLEM 7-22A Cash Budget with Supporting Schedules [LO7-2, L0744, LO7-8) 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 equip ment, 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 May $900,000 630,000 270,000 June $500,000 350,000 150,000 July $400,000 280,000 120,000 April Sales $600,000 Cost of goods sold 420,000 Gross margin 180,000 Selling and administrative expenses: Selling expense 79,000 Administrative expense 45,000 Total soling and administrative expenses.. 124.000 Not operating income $ 56,000 "Includes $20,000 of depreciation each month. 120,000 52,000 172,000 $ 98,000 62,000 41,000 103,000 47000 51,000 38,000 89,000 $ 31,000 b 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 $200,000, and March's sales totaled $300,000 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 $126,000 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 $84.000 f. Dividends of $49,000 will be declared and paid in April 8. Land costing $16,000 will be purchased for cash in May. h The cash balance at March 3 is 552.000; the company must maintain a cash balance of at least S40.000 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 15 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 quartet e. Required 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. Prepares cath budget for April, May, and June as well as in total for the quarter