(Cash budget; challenging) Jud’s Department Store typically makes 80 percent of its sales on credit. It bills sales twice monthly, on the 10th of the month for the last half of the prior month’s sales and on the 20th of the month for the first half of the current month’s sales. All sales are made with terms of 2/10, n/30. Based on past experience, accounts receivable are collected as follows:

Jud’s average profit margin on its products is 30 percent of selling price.
Jud’s purchases merchandise to meet the current month’s sales demand and to maintain a desired monthly ending inventory of 25 percent of the next month’s sales. All purchases are on account with terms of n/30. Jud’s pays for one-half of a month’s purchases in the month of purchase and the Other half in the month following the purchase. All sales and purchases oc¬ cur evenly throughout the month,

a. How much cash can Jud’s plan to collect from credit sales during July 2006?

b. How much cash can Jud’s plan to collect in September 2006 from sales made in August?

c. What will be the budgeted dollar value of Jud’s inventory on August 31, 2006?

d. How much merchandise should Jud’s plan to purchase during June 2006?

e. What are Jud’s budgeted cash payments for merchandise during August 2006?
(CMA adapted)

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Within the discount period 80% 18% 2% On the 30th day Uncollectible Sales for May 2006 were $600,000, and projected sales for the next four months are June $800,000 July 700,000 August 800,000 September 600,000