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 $103,600. f. Dividends of $41,000 will be declared and paid in April. g. Land costing $49,000 will be purchased for cash in May. h. The cash balance at March 31 is $63,000; the company must maintain a cash balance of at least $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 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.
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 $103,600. f. Dividends of $41,000 will be declared and paid in April. g. Land costing $49,000 will be purchased for cash in May. h. The cash balance at March 31 is $63,000; the company must maintain a cash balance of at least $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 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Garden Sales, Incorporated, 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:
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses:
Selling expense
Administrative expense
Total selling and administrative expenses
Net operating incone
"Includes $34,000 of depreciation each month.
April
$ 740,000
518,000
222,000
92,000
51,000
143,000
$ 79,000
Hay
$ 920,000
644,000
276,000
111,000
69,600
180,600
$ 95,400
June
$ 620,000
434,000
186,000
73,000
45,200
118,200
$ 67,800
July
$530,000
371,000
159,000
53,000
50,000
103,000
$56,000
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 $290,000, and March's sales totaled $305,000.
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 $137,200.
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 $103,600.
f. Dividends of $41,000 will be declared and paid in April.
nland enetinn $49000 will be purchased for cash in Maur
Transcribed Image Text:total $137,200.
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 $103,600.
f. Dividends of $41,000 will be declared and paid in April.
g. Land costing $49,000 will be purchased for cash in May.
h. The cash balance at March 31 is $63,000; the company must maintain a cash balance of at least $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 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.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2A
Required 28
Cash sales
Required 3
Prepare a schedule of expected cash collections for April, May, and June, and for the quarter in total.
Schedule of Expected Cash Collections
April
May
June
Quarter
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