Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings

Homework answers / question archive / Garden Sales, Inc

Garden Sales, Inc


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: April 350,000 721,000 336,000 266,000 150,000 309,000 144,000 114,000 May June Sales $ 500,000 $1,030,000 480,000 $ 380,000 Cost of goods sold Gross margin Selling and administrative expenses: 97,000 44,000 98,000 59,000 38,000 Selling expense Administrative expense 59,200 36,800 36,000 141,000 157,200 95,800 74,000 $ 9,000 151,800 S 48,200 S 40,000 Total selling and administrative expenses Net operating income "Includes $21,000 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% !lected in the first month following the month of sale, and the remaining 20% collected in the second nth following the month of sale. February's sales totaled $195,000, and March's sales totaled $240,000 % 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 $102,200.

d. Inventory purchases are paid for within 15 days. Therefore, 50

e. Each month's ending inventory must equal 20% of the cost of the merchandise to be sold in the followi month. The merchandise inventory at March 31 is $70,000.

f. Dividends of $28,000 will be declared and paid in April.

g. Land costing $36,000 will be purchased for cash in May

h. The cash balance at March 31 is $50,000, the company must maintain a cash balance of atleast $40,000

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.

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 10% in 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 $70,000 and accounts payable for inventory purchases at March 31 remains $102,200

Option 1

Low Cost Option
Download this past answer in few clicks

4.87 USD


Already member?

Option 2

Custom new solution created by our subject matter experts