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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:

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

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 $$250,000,$ and March's sales totaled $$265,000.$

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 $$120,400.$

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 $$92,400.$

f$.$ Dividends of $$33,000$ will be declared and paid in April.

g$.$ Land costing $$41,000$ will be purchased for cash in May.

h$.$ The cash balance at March $31$ is $$55,000$; the company must maintain a cash balance of at least $$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 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:

Prepare a schedule of expected cash collections for April, May, and June, and for the quarter in total.

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.

Prepare a cash budget for April, May, and June as well as in total for the quarter.

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