Problem 8-24 (Algo) Cash Budget with Supporting Schedules [LO8-2, LO8-4, LO8-8) Garden Sales, Inc., sells garden supplles. 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 equpment, which occur durlng May. The following Informatlon 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 $ 650, 000 $ 820,000 $ 530,000 574, e00 buly $430,eee Dune Sales Cost of goods sold Gross margin 455, ee0 371,800 301, 000 195,e00 246,000 159,000 129, 000 Selling and administrative expenses: Selling expense Administrative expense Total selling and administrative expenses 102,000 62,480 83, e00 64, 000 43,0ee 46, sea 39,200 103,200 41, 0ee 84,000 129, se0 164, 480 Net operating income S65, see 81,600 55,800 45,eee "Includes $25,000 of depreclation each month. b. Sales are 20% for cash and 80% on account. C. Sales on account are collected over a three-month perlod with 10% collected In the month of sale; 70% collected In the first month following the month of sale; and the remalning 20% collected in the second month following the month of sale. February's sales totaled $245,000, and March's sales totaled $260,000. d. Inventory purchases are pald for within 15 days. Therefore, 50% of a month's Inventory purchases are pald for in the month of purchase. The remaining 50% Is pald in the following month. Accounts payable at March 31 for Inventory purchases during March total $118,300. 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 $91,000. f. Dividends of $32,000 will be declared and pald in April. g. Land costing $40,000 will be purchased for cash in May. h. The cash balance at March 31 Is $54,000, the company must maintaln 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.