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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% tor cash and 80% on account. c. Sales on account are collected over a thee-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 pale. February's sales totaled $245,000, and Marchis sales totoled $260,000 d. Inventory purchases are paid for within 15 days. Therefore. 50% of a months inventory purchases are paid for in the month of purchase. The remaining 50% is poid in the following month. Accounts payable at March 31 for inventory purchases during March total $118,300 e. Each month's ending inventory must equal 20% of the cost of the merchandise to be soid in the following month The merchandise Ifventory at March 31 is $91,000. f. Dividends of $32.000 will be declored and paid in Aprii. 9. Land costing $40,000 will be purchased for cash in Moy. h. The cash balance at March 31 is $54,000, the company must maintain a cash balance of at least $40,000 at the end of each month. E. The company has an agreement with a lacal 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 17 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 plis accumulated interest at the end of the quarter. Schedule of Expected Cash Disbursements for Merchandise Purchases Garden Sales, Incorporated Cash Budget For the Quarter Ended June 30 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 April May

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