Help Sav Garden Sales, Inc., sells garden supplies. Management is planning its c

Question

Help Sav 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: 610,000 $1,110,000 $570,000 470,000 427.000777,000 399,000 329,000 333.000 171,000 141,000 Cost of goods sold in 183.000 47,000 113,000 48.500 161,500 106,000 65.600 68,000 42,200 45,000 s21,500 $ 161,400 $ 60,800 49,000 Includes $29,000 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 safe. February's sales totaled $265,000, and March's sales totaled $280,000 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 $121,100. e Each months 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 $85,400 f Dividends of $36,000 will be declared and paid in April. g·Land costing $44,000 will be purchased for cash in May. h. The cash balance at March 31 is $58,000; the company must maintain a cash balance of at least $40,000 at the end of each month. Prev 1 of 1 | Next

Explanation / Answer

3.

*Excluding depreciation which is a non cash expense.

Interest = $58000 x 1% x 3 months = $1740

1 Schedule of Expected Cash Collections April May June Quarter Sales 610000 1110000 570000 2290000 Credit sales (80% of sales) 488000 888000 456000 1832000 Cash sales (20% of sales) 122000 222000 114000 458000 Collection of February sales ($265000 x 80% x 20%) 42400 42400 Collection of March sales ($280000 x 80%) 70% and 20% 156800 44800 201600 Collections in month of sales (25% of credit sales) 122000 222000 114000 458000 Collections in month after sale (65% of credit sales) 317200 577200 894400 Collections in second month after sale (10% of credit sales) 48800 48800 Total cash receipts $ 443200 806000 854000 2103200 2a. Merchandise Purchases Budget April May June July Cost of goods sold $ 427000 777000 399000 329000 Desired ending inventory as percent of following month's cost of goods sold 15% 15% 15% Ending inventory 116550 59850 49350 Total purchases required $ 543550 836850 448350 Less: Beginning inventory 85400 116550 59850 Budgeted merchandise purchases $ 458150 720300 388500 2b. Schedule of Expected Cash Disbursements for Merchandise Purchases April May June Quarter Budgeted merchandise purchases $ 458150 720300 388500 1566950 Payment of accounts payable 121100 121100 Payment in month of purchase (50%) 229075 360150 194250 783475 Payment in month following purchase (50%) 229075 360150 589225 Total cash disbursements $ 350175 589225 554400 1493800

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