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 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 AprilJuly are:

	April		May		June		July
Sales	$	600,000	$	900,000	$	500,000	$	400,000
Cost of goods sold		420,000		630,000		350,000		280,000
Gross margin		180,000		270,000		150,000		120,000
Selling and administrative expenses:
Selling expense		79,000		120,000		62,000		51,000
Administrative expense*		45,000		52,000		41,000		38,000
Total selling and administrative expenses		124,000		172,000		103,000		89,000
Net operating income	$	56,000	$	98,000	$	47,000	$	31,000

*Includes $20,000 of depreciation each month.

2. Sales are 20% for cash and 80% on account.

3. 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. Februarys sales totaled $200,000, and Marchs sales totaled $300,000.

4. Inventory purchases are paid for in 15 days. Therefore, 50% of a months 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.

5. Each months 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.

6. Dividends of $49,000 will be declared and paid in April.

7. Land costing $16,000 will be purchased for cash in May.

8. The cash balance at March 31 is $52,000; the company must maintain a cash balance of at least $40,000 at the end of each month.

9. 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.

The companys 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:

1. 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.

2. 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 $84,000 and accounts payable for inventory purchases at March 31 remains $126,000.

Required:

1. Using the presidents new assumptions in (a) above, prepare a schedule of expected cash collections for April, May, and June and for the quarter in total.

2. Using the presidents new assumptions in (b) above, 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. Using the presidents new assumptions, prepare a cash budget for April, May, and June, and for the quarter in total.

I don't know what is wrong with my answer... I would appreciate it if you could tell me the solution process as well as the answer.

b. A schedule of expected cash disbursements for merchandise purchases for April, May, and quarter in total 3. Using the president's new assumptions, prepare a cash budget for April May, and June, an for the quarter in total Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 2B Reg 3 Using the president's new assumptions in (a) above, prepare a schedule of expected cash collectio and for the quarter in total. Schedule of Expected Cash Collections April May June S 120,000 $ 180,000 $ 100,000 Quarter 400,000 Cash sales Sales on account February March 16,000 X 156.000 120,000 24,000 312,000 180,000 April May June Total cash collections 48,000 468,000 100,000 716,000 16.000 180.000 480,000 648,000 100.000 $ 1.824.000 $ 412.000 $ "696,000 $ Red Req 2A > 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 quarter in total 3. Using the president's new assumptions, prepare a cash budget for April, May, and June, and for the quarter in total. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Req 28 Reg 3 Using the president's new assumptions in (b) above, prepare the following for merchandise inventory purchases budget for April, May, and June. Merchandise Purchases Budget April May Budgeted cost of goods sold OS 420,000 $630,000 Add Desired ending merchandise 94,500 52.500 inventory Total needs 514,500 682,500 Less: Beginning merchandise inventory 84.000 126,000 Required inventory purchases $430,500 556.500 June 350.000 42,000 392,000 70,000 322.000 $ $ Using 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 quarter in total. 3. Using the president's new assumptions, prepare a cash budget for April, May, and June, and for the quarter in total. X Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 Reg 2A Req 2B Joy Reg 3 Using the president's new assumptions in (b) above, prepare the following for merchandise inventory, a sche 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 Beginning accounts payable $ 126,000 126,000 April purchases 215,250 215,250 430,500 May purchases 278,250 X 278,250 X 556,500 June purchases 166.000 166,000 $ $ $ Total cash disbursements $ 341.250 493,500 444 250 1,279,000 Return to question Reg 1 Reg 2A Reg 28 Reg 3 Using the president's new assumptions, prepare a cash budget for April, May, and June, and for the quarter in total. deficiency, repayments and interest should be indicated by a minus sign.) Garden Sales, Inc. Cash Budget For the Quarter Ended June 30 April May June Quarter Beginning cash balance $ 52,000 $ 40,000 $ 40,000 $ 52,000 Add collections from customers 412,000 $ 696.000 716,000 1,824,000 Total cash available 464,000 736.000 756,000 1,876.000 Less cash disbursements Purchases for inventory 341,250 493,500 $ 444,250 1,279.000 Selling expenses 79,000 120,000 62,000 261,000 Administrative expenses 25,000 32.000 21,000 78,000 Land purchases 16,000 16,000 Dividends paid 49,000 49.000 Total cash disbursements 494,250 661,500 527 250 1.683.000 Excess (deficiency) of cash available over (30 250) 74,500 228.750 193,000 disbursements Financing Borrowings 70 250 70,2503 Repayments (34,500) (35,750) (70,250) Interest (1,060) (1.060) Total financing 70,250 (34,500) (36,810) (1.060) Ending cash balance $ 40,000 $ 40,000 $ 191,940 $ 191.940