Question

6) (12 points) Using all the information from the tables above, complete the revised cash budget below. June Quarter Garden Sales, Inc. Cash Budget For the Quarter Ended June 30 April May Beginning cash balance Add collections from customers Total cash available Less cash disbursements: Purchases for inventory Selling & Administrative expenses Land purchases Dividends paid Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total financing Ending cash balance 7) (1.5 points) If the company can meet the president's new assumptions, how will it affect the cash budget? Will the company be able to keep its borrowing below the new limit? Explain in 30 to 50 words.

Answer 1

2 a)	Inventory purchases budget:
	April	May	June	July
Budgeted cost of goods sold	$455,000	$574,000	$371,000	$301,000
Add desired ending inventory*	$114,800	$74,200	$60,200
Total needs	569,800	648,200	431,200
Less beginning inventory	91000	$114,800	$74,200
Required inventory purchases	$478,800	$533,400	$357,000
*20% of the next month’s budgeted cost of goods sold.
b) Schedule of expected cash disbursements for inventory:		b.
	April	May	June	Quarter
Accounts payable, March 31	$118,300			$118,300
April purchases	239,400	$239,400		$478,800
May purchases		266,700	$266,700	$533,400
June purchases	$                -	$               -	$ 178,500.00	$178,500
Total cash disbursements	357700	506100	445200	1309000
GARDEN SALES, INC.
Cash Budget
For the Quarter Ended June 30
	April	May	June	Quarter
Cash balance, beginning	$   54,000.00	$  40,600.00	$   40,300.00	$     54,000.00
Add collections from sales	$ 366,800.00	$635,200.00	$ 711,600.00	$1,713,600.00
Total cash available	$ 420,800.00	$675,800.00	$ 751,900.00	$1,767,600.00
Less disbursements:
Purchases for inventory	$ 357,700.00	$506,100.00	$ 445,200.00	$1,309,000.00
Selling expenses	$   83,000.00	$102,000.00	$   64,000.00	$   249,000.00
Administrative expenses	$   21,500.00	$  37,400.00	$   14,200.00	$     73,100.00
Land purchases	$                -	$  40,000.00	$                -	$     40,000.00
Dividends paid	$   32,000.00	—	—	$     32,000.00
Total disbursements	$ 494,200.00	$685,500.00	$ 523,400.00	$1,703,100.00
Excess (deficiency) of cash	$  (73,400.00)	$   (9,700.00)	$ 228,500.00	$     64,500.00
Financing:
Borrowings	$ 114,000.00	$  50,000.00	$                -	$   164,000.00
Repayments	$                -	$               -	$(164,000.00)	$  (164,000.00)
Interest*	$                -	$               -	$    (4,920.00)	$      (4,920.00)
Total financing	$ 114,000.00	$  50,000.00	$(168,920.00)	$      (4,920.00)
Cash balance, ending	$   40,600.00	$  40,300.00	$   59,580.00	$     59,580.00