Refer to the data for Garden Sales, Inc., in Problem 7-22A. 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 Problem 7-22A.

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 $84,000 and accounts payable for inventory purchases at March 31 remains $126,000. All other information from Problem 7-22A that is not referred to above remains the same.

Required:

1. Using the president's new assumptions in

(1) Above, prepare a schedule of expected cash collections for April, May, and June and for the quarter in total.

2. Using the president's new assumptions in

(2) Above, 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. Using the president's new assumptions, prepare a cash budget for April, May, and June, and for the quarter in total.

4. Prepare a brief memorandum for the president explaining how his revised assumptions affect the cash budget.