301,000 129,000 217,000 93,000 Cost of goods sold Gross margin Selling and administrative expenses: Seling expense Administrative expense" Total selling and administrative expenses Net operating income 672,000 287,000 288,000 123,000 83,000 40,500 123,500 $ 5,500 91,000 53,600 144,600 $ 143,400 52,000 32,600 84,600 $ 38,400 31,000 29,000 60,000 $ 33,000 Indludes $13,000 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 $145,000, and March's sales totaled $205,000. 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 invent purchases during March total $87,500. 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 $60,200. f. Dividends of $21,000 will be declared and paid in April. g. Land costing $29,000 will be purchased for cash in May. h. The cash balance at March 31 is $43,000; the company must maintain a cash balance of atleast $40,000 at the end of each month. i. 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 mon 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. The company's president is interested in knowing how reducing inventory levels and collecting accounts receivable sooner will impact the cash budget. He revises the cash collection and ending inventory assumptions as follows: 1. Sales continue to be 20% for cash and 80% on credit. However, credit sales from April, May, and June are collected over a three-month period with 25% collected in the month of sale, 65% collected in the month following sale, and n the second month following sale. Credit sales from February and March are collected during the second quarter using the collection percentages specified in the main section. 2. The company maintains its ending inventory levels for April, May, and June at 15% of the cost of merchandise to be sold in the following month. The merchandise inventory at March 31 remains $60,200 and accounts payable for nventory purchases at March 31 remains $87,500. Required: 1. Using the president's new assumptions in (1) above, prepare a schedule of expected cash collections for April, May, and June and for the quarter in total.