Problem 8-24 (Algo) Cash Budget with Supporting Schedules [L08-2, LOB-4, LOB-8] Garden Sales, Incorporated, usually has to borrow money during the second quarter to support peak sales of lawn care equipment during May. It gathered the following information to prepare a cash budget for the quarter: a. Budgeted monthly absorption costing income statements for AprilJuly are: April May June July Sales $ 780,000 $ 940,000 $ 640,000 $ 550,000 Cost of goods sold 546,000 658,000 448,000 385,000 Gross margin 234,000 282,000 192,000 165,000 Selling and administrative expenses: Selling expense 94,000 113,000 75,000 55,000 Administrative expense* 52,000 71,200 46,400 52,000 Total selling and administrative expenses 146,000 184,200 121,400 107,000 Net operating income $ 88,000 $ 97,800 $ 70,600 $ 58,000 *lncludes $36,000 of depreciation each month. b. Sales are 20% for cash and 80% on account. c. Sales on account are collected over a threemonth 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 $300,000, and March's sales totaled $315,000. d. Inventory purchases are paid for within 15 days. Therefore, 50% ofa month's inventory purchases are paid for in the month of purchase. The remaining 50% are paid in the following month. Accounts payable at March 31 for inventory purchases during March total $142,800. e. Each month's ending inventory must equal 20% of the cost ofthe merchandise to be sold in the following month. The merchandise inventory at March 31 is $109,200. f. Dividends of $43,000 will be declared and paid in April. g. Land costing $51,000 will be purchased for cash in May. h. The cash balance at March 31 is $65,000; the company must maintain a cash balance of at least $40,000 at the end of each month. i. 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 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. 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. Prepare a cash budget for April, May, and June as well as in total for the quarter. b. A schedule of expected cash disbursements for merchandise purchases for April, May, and June, and for the quarter in total. 3. Prepare a cash budget for April, May, and June as well as in total for the quarter. Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 2B Required 3 Prepare a cash budget for April, May, and June as well as in total for the quarter. Note: Cash deficiency, repayments and interest should be indicated by a minus sign. Garden Sales, Incorporated Cash Budget For the Quarter Ended June 30 April May June Quarter Beginning cash balance $ $5,000 $ 40,000 40,000 $ 65.000 Add collections from customers 442,800 750,400 830,400 2,023,600 Total cash available 507,800 790,400 870,400 2,088,600 Less cash disbursements: Purchases for inventory 427,000 592,200 525,700 1,544,900 Selling expenses 94,000 113,000 75,000 282,000 Administrative expenses 16,000 35,200 10,400 61,600 Land purchases 51,000 0 51,000 Dividends paid 43,000 0 43,000 Total cash disbursements 580,000 91,400 $11, 100 ,982,500 Excess (deficiency) of cash available over disbursements (72,200) (1,000 259,300 106, 100 Financing Borrowings 112,200 41,000 0 153,200 Repayment 0 0 (153,200) 153,200) Interest 0 0 4, 186) 4, 186) Total financing 112,200 41,000 (157,386) 4, 186) Ending cash balance $ 40,000 $ 40,000 101,914 $ 101,914 Required 2B Required 3