Question

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 hich 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 $ 440,000 308,000 132,000 May S 970,000 679,000 291,000 June $ 420,000 294,000 126,000 July $ 320,000 224,000 96,000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense* Total selling and administrative expenses Net operating income 85,000 41,000 126,000 $ 6,000 92,000 54,400 146,400 S 144,600 53,000 33,200 86,200 $ 39,800 32,000 30,000 62,000 $ 34,000 *Includes $14,000 of depreciation each month. 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 $150,000, and March's sales totaled $210,000. 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 $89,600. 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 $61,600. f. Dividends of $22,000 will be declared and paid in April. g. Land costing $30,000 will be purchased for cash in May. h. The cash balance at March 31 is $44,000; the company must maintain a cash balance of atleast $40,000 at the end of each month. 1. 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.

Answer 1

an 1
Schedule of Cash collection
	April	May	June	Total
Sales in value (working) S	$440,000	970000	420000	1830000
Cash sales C (20%*S)	$88,000	$194,000	$84,000	366000
Sales on account A= S-C	$352,000	$776,000	$336,000	$1,464,000
Feb sales (150000*80%*20%)	24000	0		24000
Marc sales (210000*.8*70% and 20%)	117600	33600		151200
April sales (352000*10%,70%,20%)	$35,200	$246,400	$70,400	352000
May Sales (776000*10%/70%)		$77,600	$543,200	620800
June sales (A*10%)			$33,600	33600
Total A	$264,800	$551,600	$731,200	$1,547,600
the ones marked in bold please enter that
Purcahse Budget	April	May	June	Total	July
Budgeted cost of good sold G	308000	679000	294000	1281000	224000
Budgeted Ending Inventory 20% of next month cost of sales G*.4	135800	58800	44800	44800
Total needs	443800	737800	338800	1325800
Less: Budgeted Beginning Inventory	61600	135800	58800	61600
Required Invemtory purchased	382200	602000	280000	1264200
ans b
Cash Disbursement Schedule-50% same month 50% next month
Beginning Accouts payable	89600			89600
From April Purchases (	191100	191100		382200
From May Purchases		301000	301000	602000
From June purchases			140000	140000
Total cash disbursements	280700	492100	441000	1213800
Cash budget
	April	May J	June	Total
Beginning Cash balance	44000	$40,100	$40,200	44000
AddL collection from customers	$264,800	551600	731200	1547600
Total cash available	308800	591700	771400	1591600
Less: Cash Disbursements
Paymet to suppliers	280700	492100	441000	1213800
Selling expenses	85000	92000	53000	230000
Adm expenses (expenses-14000)	27000	40400	19200	86600
Land purchased		30000		30000
Dividend paid	22000	0	0	22000
Total cash Disbursements	$414,700	$654,500	$513,200	1582400
Excess /(deficiency) of cash receipts over cash disbursements	($105,900)	($62,800)	$258,200	$9,200
Financing
Borrowed (105900+40000) and (63000+40000)	146000	103000		$249,000
Repaid			($211,760)	($211,760)
			(258200-40000-6440)
Interest Repaid			-6440	($6,440)
			(146000*3%)+(103000*2%)
Total financing	146000	103000	-218200	30800
Ending Cash balance	$40,100	$40,200	$40,000	$40,000
If any doubt please comment