Answer:
Garden Sales, Inc.
                                                        April            May          June          Total
1. Cash Collections:
Cash sales (20%)                         $92,000   $198,000   $88,000  $378,000
Credit sales:
10% month of sale                         36,800       79,200     35,200       151,200
70% month following sale           123,200    257,600   554,400     935,200
20% second month following      25,600      35,200      73,600      134,400 
Total cash collections               $277,600 $570,000  $751,200 $1,598,800
2. Merchandise Inventory:
a.    Purchases Budget                   April            May          June      
Cost of goods sold                      322,000    693,000   308,000
Ending inventory (15%)                 103,950      46,200     35,700
Goods available for sale             425,950    739,200   343,700  
Beginning inventory                      84,000     103,950    46,200 
Purchases                                    341,950    635,250   297,500
b. Cash payment for purchases:
50% month of purchase              170,975     317,625    148,750      637,350
50% month following purchase 126,000      170,975    317,625      614,600
Total payment for purchases  $296,975  $488,600 $466,375 $1,251,950
3. Cash Budget
                                                        April            May          June         Total
Beginning cash balance           $46,000   $40,225     $40,425     $46,000
Total cash collections                311,200    652,800     727,600 $1,691,600
Cash available                        $357,200 $693,025   $768,025 $1,737,600
Payment for purchases          $296,975  $488,600 $466,375 $1,251,950
Other payments:
Dividends                                   24,000                                              24,000
Land purchase                                              32,000                           32,000
Selling & administrative exp.   115,000       134,000      73,400      322,400
Total cash payments            $435,975   $654,600  $539,775 $1,630,350
Cash Balance                           (78,775)       38,425    228,250     228,250
Minimum Cash balance         (40,000)      (40,000)   
Cash required                       $118,775         $1,575       0                      0
Cash borrowed                    $119,000        $2,000   (123,400)     (123,400)
Ending balance                       40,225        40,425    104,850       104,850
4. To: The President
From: FC
Subject: Revised Estimates and the Cash Budget
Date: April 26, 2021
The revised estimates will ensure that the company has the ability to pay off its borrowings in April and May by the end of the second quarter.
It should be maintained.
Regards,
Explanation:
a) Data and Calculations:
Budgeted monthly absorption costing income statements for April-July are:
                                                        April            May          June          July
Sales                                           $460,000 $990,000 $440,000 $340,000
Cost of goods sold                      322,000    693,000   308,000   238,000
Gross margin                                138,000    297,000    132,000    102,000
Selling and administrative expenses *
Selling expense                             89,000      94,000     55,000     34,000
Administrative expense                42,000      56,000     34,400     32,000
Total selling and administrative
 expenses                                     131,000     150,000     89,400     66,000
Net operating income                  $7,000   $147,000   $42,600   $36,000
                                                        April            May          June          July
Sales                                           $460,000 $990,000 $440,000 $340,000
Credit sales (80%)                        368,000    792,000   352,000   272,000
Cash collections
Cash sales (20%)                         $92,000   $198,000   $88,000  $68,000
Credit sales:
10% month of sale                         36,800       79,200     35,200     27,200
70% month following sale           123,200    257,600   554,400   246,400
20% second month following      25,600      35,200      73,600    158,400 
Total cash collections               $277,600 $570,000  $751,200 $500,000
                                                        April            May          June          July
Cost of goods sold                      322,000    693,000   308,000   238,000
Ending inventory (20%)                138,600       61,600     47,600
Goods available for sale             460,600    754,600   355,600  
Beginning inventory                      64,400     138,600      61,600     47,600
Purchases                                   396,200     616,000   294,000
Cash payment for purchases:
50% month of purchase             198,100     308,000    147,000
50% month following purchase 93,800       198,100   308,000
Total payment for purchases $291,800   $506,100 $455,000
Other payments:
Dividends                                   24,000
Land purchase                                              32,000
Selling & administrative exp.   115,000       134,000      73,400
Total cash payments           $430,800     $672,100 $528,400
Principal debt to bank at the end of the quarter =    $121,000
 + Interests: 1% of $119,000 = $1,190
 1% of $121,000                         1,210
Total interest owed              $2,400                               2,400
Total debt to the bank at the end of the quarter = $123,400
Revised Estimates:
Credit sales (80%)                        368,000    792,000   352,000   272,000
Cash collections
Cash sales (20%)                         $92,000   $198,000   $88,000  $378,000
Credit sales:
25% month of sale                        92,000     198,000      88,000    378,000
65% month following sale            114,400    239,200     514,800    868,400
10% second month following        12,800        17,600      36,800       67,200
Total cash collections                $311,200  $652,800  $727,600 $1,691,600
                                                         April            May          June          July
Cost of goods sold                      322,000    693,000   308,000   238,000
Ending inventory (15%)                 103,950      46,200     35,700
Goods available for sale             425,950    739,200   343,700  
Beginning inventory                      84,000     103,950    46,200 
Purchases                                    341,950    635,250   297,500
Cash payment for purchases:
50% month of purchase              170,975     317,625    148,750
50% month following purchase 126,000      170,975    317,625
Total payment for purchases  $296,975  $488,600 $466,375
Other payments:
Dividends                                   24,000
Land purchase                                              32,000
Selling & administrative exp.   115,000       134,000      73,400
Total cash payments           $435,975    $654,600  $539,775