The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

a$.$ The gross margin is $25\%$ of sales.

b$.$ Actual and budgeted sales data:

c$.$ Sales are $60\%$ for cash and $40\%$ on credit. Credit sales are collected in the month following sale. The accounts

receivable at March $31$ are a result of March credit sales.

d$.$ Each month's ending inventory should equal $80\%$ of the following month's budgeted cost of goods sold.

e$.$ One$-$half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the

following month. The accounts payable at March $31$ are the result of March purchases of inventory.

f$.$ Monthly expenses are as follows: commissions, $12\%$ of sales; rent, $$4,000$ per month; other expenses $($excluding

depreciation$),6\%$ of sales. Assume that these expenses are paid monthly. Depreciation is $$783$ per month $($includes

depreciation on new assets$).$

g$.$ Equipment costing $$3,200$ will be purchased for cash in April.

h$.$ Management would like to maintain a minimum cash balance of at least $$4,000$ 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 $$20,000.$ 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.

Required:

Using the preceding data:

Complete the schedule of expected cash collections.

Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise

purchases.

Complete the cash budget.

Prepare an absorption costing income statement for the quarter ended June $30.$

Prepare a balance Garden Sales, Incorporated, 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:

Budgeted monthly absorption costing income statements for April$$July are:

April May June July

Sales $ $520,000$ $ $720,000$ $ $420,000$ $ $320,000$

Cost of goods sold $364,000504,000294,000224,000$

Gross margin $156,000216,000126,00096,000$

Selling and administrative expenses:

Selling expense $72,00092,00053,00032,000$

Administrative expense$*41,00054,40033,20030,000$

Total selling and administrative expenses $113,000146,40086,20062,000$

Net operating income $ $43,000$ $ $69,600$ $ $39,800$ $ $34,000$

$*$Includes $$14,000$ of depreciation each month.

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; $80\%$ collected in the first month following the month of sale; and the remaining $10\%$ collected in the second month following the month of sale. February$$s sales totaled $$150,000,$ and March$$s sales totaled $$300,000.$

Inventory purchases are paid for within $15$ days. Therefore, $50\%$ of a month$$s inventory purchases are paid for in the month of purchase. The remaining $50\%$ is paid in the following month. Accounts payable at March $31$ for inventory purchases during March total $$120,400.$

Each month$$s ending inventory must equal $20\%$ of the cost of the merchandise to be sold in the following month. The merchandise inventory at March $31$ is $$72,800.$

Dividends of $$22,000$ will be declared and paid in April.

Land costing $$30,000$ will be purchased for cash in May.

The cash balance at March $31$ is $$44,000$; the company must maintain a cash balance of at least $$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.

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.