Student question   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:   Budgeted monthly absorption costing income statements for April–July are:     April May June July Sales $ 730,000 $ 910,000 $ 610,000 $ 520,000 Cost of goods sold 511,000 637,000 427,000 364,000 Gross margin 219,000 273,000 183,000 156,000 Selling and administrative expenses:         Selling expense 91,000 110,000 72,000 52,000 Administrative expense* 50,500 68,800 44,600 49,000 Total selling and administrative expenses 141,500 178,800 116,600 101,000 Net operating income $ 77,500 $ 94,200 $ 66,400 $ 55,000 *Includes $33,000 of depreciation each month.   Sales are 20% for cash and 80% on account. 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 $285,000, and March’s sales totaled $300,000. 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 $135,100. 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 $102,200. Dividends of $40,000 will be declared and paid in April. Land costing $48,000 will be purchased for cash in May. The cash balance at March 31 is $62,000; the company must maintain a cash balance of at least $40,000 at the end of each month. 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. Do not give answer in image formate

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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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:

 

Budgeted monthly absorption costing income statements for April–July are:

 

  April May June July
Sales $ 730,000 $ 910,000 $ 610,000 $ 520,000
Cost of goods sold 511,000 637,000 427,000 364,000
Gross margin 219,000 273,000 183,000 156,000
Selling and administrative expenses:        
Selling expense 91,000 110,000 72,000 52,000
Administrative expense* 50,500 68,800 44,600 49,000
Total selling and administrative expenses 141,500 178,800 116,600 101,000
Net operating income $ 77,500 $ 94,200 $ 66,400 $ 55,000

*Includes $33,000 of depreciation each month.

 

Sales are 20% for cash and 80% on account.

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 $285,000, and March’s sales totaled $300,000.

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 $135,100.

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 $102,200.

Dividends of $40,000 will be declared and paid in April.

Land costing $48,000 will be purchased for cash in May.

The cash balance at March 31 is $62,000; the company must maintain a cash balance of at least $40,000 at the end of each month.

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.

Do not give answer in image formate 

Prepare a cash budget for April, May, and June as well as in total for the quarter. (Cash deficiency, repayments and interest should
be indicated by a minus sign.)
Beginning cash balance
Add collections from customers
Total cash available
Less cash disbursements:
Purchases for inventory
Selling expenses
Administrative expenses
Land purchases
Dividends paid
Total cash disbursements
Excess (deficiency) of cash available over disbursements
Financing:
Borrowings
Repayment
Interest
Garden Sales, Incorporated
Cash Budget
For the Quarter Ended June 30
April
Total financing
Ending cash balance
$
62,000
418,000
480,000
403,200
91,000
17,500
40,000
551,700
(71,700)
0x
0
0
0
X>
$ (71,700)
$
May
40,300
711,600
751,900
565,600
110,000
35,800
48,000
759,400
(7,500)
0
0
0
0
(7,500)
$
June
40,500
797,200
837,700
504,700
72,000
11,600
588,300
249,400
0
0
0x
0
249,400
Quarter
62,000
1,926,800
1,988,800
1,473,500
273,000
64,900
48,000
40,000
1,899,400
89,400
0
0
0
0
$ 89,400
Transcribed Image Text:Prepare a cash budget for April, May, and June as well as in total for the quarter. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Beginning cash balance Add collections from customers Total cash available Less cash disbursements: Purchases for inventory Selling expenses Administrative expenses Land purchases Dividends paid Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayment Interest Garden Sales, Incorporated Cash Budget For the Quarter Ended June 30 April Total financing Ending cash balance $ 62,000 418,000 480,000 403,200 91,000 17,500 40,000 551,700 (71,700) 0x 0 0 0 X> $ (71,700) $ May 40,300 711,600 751,900 565,600 110,000 35,800 48,000 759,400 (7,500) 0 0 0 0 (7,500) $ June 40,500 797,200 837,700 504,700 72,000 11,600 588,300 249,400 0 0 0x 0 249,400 Quarter 62,000 1,926,800 1,988,800 1,473,500 273,000 64,900 48,000 40,000 1,899,400 89,400 0 0 0 0 $ 89,400
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