Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter....

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:

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

	April		May		June		July
Sales	$	540,000	$	740,000	$	440,000	$	340,000
Cost of goods sold		378,000		518,000		308,000		238,000
Gross margin		162,000		222,000		132,000		102,000
Selling and administrative expenses:
Selling expense		74,000		94,000		55,000		34,000
Administrative expense*		42,000		56,000		34,400		32,000
Total selling and administrative expenses		116,000		150,000		89,400		66,000
Net operating income	$	46,000	$	72,000	$	42,600	$	36,000

*Includes $16,000 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 $160,000, and March’s sales totaled $220,000.
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 $99,400.
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 $75,600.
Dividends of $24,000 will be declared and paid in April.
Land costing $32,000 will be purchased for cash in May.
The cash balance at March 31 is $46,000; 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.

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Req 1	Schedule of expected cash collection - Garden Sales
	Particulars	April	May	June	Quarter
	Cash sales	108,000	148,000	88,000	344,000
	Sales on Account:
	February	12,800			12,800
	March	140,800	17,600		158,400
	April	43,200	345,600	43,200	432,000
	May		59,200	473,600	532,800
	June			35,200	35,200
	Total Cash Collection	304,800	570,400	640,000	1,515,200


Req 2-a	Merchandise Purchase Budget
	Particulars	April	May	June
	Budgeted Cost of goods sold	378,000	518,000	308,000
	Add: Desired ending inventory (20% of COGS of next month)	103,600	61,600	47,600
	Total needs	481,600	579,600	355,600
	Less: Opening Inventory	75,600	103,600	61,600
	Required Inventory purchases	406,000	476,000	294,000



Req 2b	Schedule of expected cash disbursement for merchandise purchases
	Particulars	April	May	June	Total
	Beginning accounts payable	99,400			99,400
	April Purchases	203,000	203,000		406,000
	May Purchases		238,000	238,000	476,000
	June Purchases			147,000	147,000
	Total cash disbursement	302,400	441,000	385,000	1,128,400


Req 3	Cash Budget - Garden Sales Inc.
	Particulars	April	May	June	Quarter
	Opening Cash balance	46,000	40,400	40,800	46,000
	Add: Collection from customers	304,800	570,400	640,000	1,515,200
	Total Cash Available	350,800	610,800	680,800	1,561,200
	Less - Cash Disbursement:
	Purchases For Inventory	302,400	441,000	385,000	1,128,400
	Selling expenses	74,000	94,000	55,000	223,000
	Administrative expenses	26,000	40,000	18,400	84,400
	Land Purcahses	-	32,000	-	32,000
	Dividend paid	24,000	-	-	24,000
	Total Cash disbursement	426,400	607,000	458,400	1,491,800

	Excess (deficiency) of cash available over disbursements	(75,600)	3,800	222,400	69,400
	Financing:
	Borrowings	116,000	37,000	-	153,000
	Repayments	-	-	(153,000)	(153,000)
	Interest	-	-	ekkarill92 answered 2 years ago Next > < Previous Related Solutions Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter. 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: a. Budgeted monthly absorption costing income statements for April-July are: April May June July Sales ... $600,000 $900,000 $500,000 $400,000 Cost of goods sold ... 420,000... Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter.... 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: Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 730,000 $ 1,190,000 $ 650,000 $ 560,000 Cost of goods sold... Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter.... 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: Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 640,000 $ 1,140,000 $ 600,000 $ 500,000 Cost of goods sold... Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter.... 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: Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 690,000 $ 860,000 $ 570,000 $ 470,000 Cost of goods sold... Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter.... 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: Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 710,000 $ 880,000 $ 590,000 $ 490,000 Cost of goods sold... Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter.... 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: 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... Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter.... 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: Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 620,000 $ 810,000 $ 520,000 $ 420,000 Cost of goods sold... Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter.... 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: Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 640,000 $ 1,140,000 $ 600,000 $ 500,000 Cost of goods sold... Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter.... 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: Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 780,000 $ 940,000 $ 640,000 $ 550,000 Cost of goods sold... Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter.... 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: 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... ADVERTISEMENT Subjects Accounting Advanced Math Anatomy and Physiology Biology Chemistry Civil Engineering Computer Science Economics Electrical Engineering Finance History Math Mechanical Engineering Operations Management Physics Psychology Statistics and Probability Nursing Other ADVERTISEMENT Latest Questions Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a... 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Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter....

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