Problem 8-25 (Algo) Cash Budget with Supporting Schedules; Changing Assumptions (LO8-2, L08-4, LO8-8) Garden Sales, Inc., seits 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 town care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter. 1. Budgeted monthly absorption costing income statements for April-July are April May June July 5 540,000 $1,000,000 $520,000 $420,000 378,000 742.000 364,000 294,000 162,000 318.000 150,000 120.000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenso Administrative expense" Total selling and administrative expenses Net operating income 103,000 101,000 63,000 42,000 46,00 61,600 30,000 40.000 149,000 162,600 101,600 32.000 $ 13,000 $ 155,400 $ 54,400 44,000 includes $24,000 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 Alinunn the month of clans the remaininn rallortor in the corn month following the month fela Caneca 2 20 Joints to 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 $230,000, and March's sales totaled $255,000 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 of March 31 for Inventory purchases during March total $109.200 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 $75,600. 1. Dividends of $31.000 will be declared and paid in April g Land costing $39,000 will be purchased for cash in May h. The cash balance of March 31 is $53,000, the company must maintain a cash balance of at least $40,000 at the end of each month The company has on agreement with a local bank that allows the company to borrow in increments of $1.000 of 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 meturences 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 $75,600 and accounts payable for loventory purchases at March 9 Check my work 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 of March 31 remains $75,600 and accounts payable for inventory purchases at March 31 remains $109.200. Required: 1. Using the president's new assumptions in () 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 info above, prepare the following for merchandise inventory a. A merchandise purchases budget for April May, and June 6. Aschedule of expected cash disements for merchandise purchases for April May, on June and for the quarter in total 3. Using the president's new assuntions, 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. Reg 1 Reg 2 R 25 Reg Using the president's new assumptions in (a) above, prepare a schedule of expected cash collections for April May, and une and for the quarter in total Schedule of Expected Cash Collections April May June Quarter Cash sales Sales on account Fun O 2 Req ZA Reg 28 Reg 3 Reg 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. 20 points Schedule of Expected Cash Collections April May June Quarter -Book Reference Cash sales Sales on account February March April May June Total cash collections Req2A > Complete this question by entering your answers the tabs below. Reg 1 Reg 2A Req 2B Req 3 Using the president's new assumptions in (b) above, prepare the following for me purchases budget for April, May, and June. Merchandise Purchases Budget April May June Total needs Required inventory purchases Complete this question by entering your answers in the tabs below. Reg 1 Req 2A A 2B Req3 Using the president's new assumptions in (b) above, prepare the following for merchandise inventory, a schedule 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 April purchases May purchases June purchases Total cash disbursements May June Quarter Garden Sales, Inc. Cash Budget For the Quarter Ended June 30 April Beginning cash balance Add collections from customers Total cash available Less cash disbursements: Purchases for inventory Selling expenses Administrative expenses Land purchases Dividends paid Total cash disbursements Excess (deficiency) of cash available over disbursements Financing Borrowings Repayment Interest Total financing Ending cash balance