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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 May June Sales Cost of goods sold Gross margin Selling and administrative expenses: $ 560,000 392,000 168,000 760,000 460,000 $ 360,000 322,000252,000 108,000 532,000 228,000 138,000 36,000 34,000 70,000 $ 49,000 74,400 $ 45,400 $ 38,000 57,000 35,600 92,600 Selling expense Administrative expense* Total selling and administrative expenses Net operating income 76,000 43,000 119,000 96,000 57,600 153,600 "Includes $18,000 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: 80% collected in the first month following the month of sale, and the remaining 10% collected in the second month following the month of sale. February's sales totaled $175,000, and March's sales totaled $230,000 d. 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 $103,600 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 $78,400 f. Dividends of $26,000 will be declared and paid in April g. Land costing $34,000 will be purchased for cash in May. h. The cash balance at March 31 is $48,000; the company must maintain 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 $200,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. Required: 1. Prepare a schedule of expected cash collections for April, May, and June, and for the quarter in total 2. Prepare the following for merchandise inventory: a. A merchandise purchases budget for April, May, and June b. A schedule of expected cash disbursements for merchandise purchases for April, May, and June, and for the quarter in total 3. Prepare a cash budget for April, May, and June as well as in total for the quarter. Schedule of Expected Cash Collections April May June Quarter Cash sales Sales on account: February March April May June Total cash collections$ 0 $ 0 Merchandise Purchases Budget April May June Total needs 0 0 0 Required inventory purchases Schedule of Expected Cash Disbursements for Merchandise Purchases April May June Quarter April purchases May purchases June purchases Total cash disbursements 0 0 0