Problem 8-22 Cash Budget with Supporting Schedules [LO8-2, LO8-4, LO8-8]

Problem 8-22 Cash Budget with Supporting Schedules [LO8-2, LO8-4, LO8-8] 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 oflawn care equipment, which oocur 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 Apri July are Sales 5 650,000 $ 820,000 $ 530,000 $ 430,000 455,000 574,000 371,000 301,000 Cost of goods sold Gross margin Selling and administrative expenses: 195,000 246,000 159,000 29,000 Selling expense 83,000 102,000 64,000 43,000 48,500 62,400 39200 41,000 129,500 164,400 103,200 84,000 5 65,500 $ 81800 $ 55,800 $ 45,000 Total selling and administrative expenses Net operating income Includes $25,000 ofdepreciation 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% oollected in the month of sale: 70% collected in the first month following the month of sale, and the remaining 20% oo!lected in the second month following the month of sale. Februarys sales totaled $245,000, and Marchs sales totaled $280,000 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 $118,300 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 $91,000. f. Dividends of $32,000 will be declared and paid in April. g Land costing $40,000 will be purchased for cash in May h.The cash balanoe at March 31 is $54,000; the company must maintain a cash balanoe of ateast $40,000 at the end ofeach month. i. The company has an agreementwith a local bank that allows the company to borrow in increments of $1,000 atthe beginning ofeach month, up to a total loan balanoe 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 ofthe quarter