Question

Problem 8-24 Cash Budget with Supporting Schedules (LO8-2, LO8-4, LO8-8] 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 $ 540,000 $ 740,000 $ 440,000 $ 340,000 378,000 518,000 308,000 238,000 162,000 222,000 132,000 102,000 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense* Total selling and administrative expenses Net operating income 74,000 42,000 116,000 $ 46,000 94,000 55,000 56,000 34,400 150,000 8 9,400 $ 72,000 $ 42,600 34,000 32,000 66,000 $ 36,000 *Includes $16,000 of depreciation each month.

Answer 1

Req 1: Schedule of expected Cash Collections:
	April	May	June	Quarter
Cash Sales	108000	148000	88000	344000
Sales on account:
Feb	12800			12800
Mar	140800	17600		158400
Apr	43200	345600	43200	432000
may		59200	473600	532800
June			35200	35200
Total Cash collection	304800	570400	640000	1515200
Req 2A)Merchandise Purchases Budget:
	April	May	June	Quarter
COGS	378000	518000	308000	1204000
Add: Ending bal.	103600	61600	47600	47600
Total needs	481600	579600	355600	1251600
Less:Opening bal.	75600	103600	61600	75600
Merchandise Purchases	406000	476000	294000	1176000
Req 2B) Cash disbursements for merchandise purchases:
	April	May	June	Quarter
Purchases:
March	99400			99400
April	203000	203000		406000
May		238000	238000	476000
June			147000	147000
Total Purchase disburse.	302400	441000	385000	1128400
Req 3) Cash Budget:
	April	May	June	Quarter
Begin cash bal.	46000	40000	40000	46000
Add:collections	304800	570400	640000	1515200
Total Cash available	350800	610400	680000	1561200
Less:Cash disbursements:
Purchases	302400	441000	385000	1128400
Selling exp.	74000	94000	55000	223000
Admin exp.	26000	40000	18400	84400
Land purchases		32000		32000
Dividends paid	24000			24000
Total cash disbursements	426400	607000	458400	1491800
Excess (def.) of cash available over disburse.	-75600	3400	221600	69400
Financing:
Borrowings	115600	36600		152200
Repayment			-152200	-152200
Interest			-2678	-2678
Total Financing	115600	36600	-154878	-2678
Ending Cash balance	40000	40000	66722	66722