You have been asked to prepare the monthly cash budget for June and July for the Merchandise and Mercantile Company. The company sells a unique product that is specially made for it by a major product manufacturer. The selling price is $16 per unit. All sales are on account.

Merchandise purchases are also on account. The policy of the company is to purchase sufficient quantity of product to ensure that each month?s ending inventory is 50% of the following month?s expected sales quantity.

The assignment file contains extracts from the general journal showing the journal entries pertaining to certain relevant transactions that have occurred and a set of entries the bookkeeper has provided that indicate the transactions expected to occur affecting cash, accounts payable, accounts receivable, and merchandise inventory accounts due to the projected sales revenues and projected merchandise purchases on the master budget. This analysis, with other additional data, is shown below. Assume today is May 31, 20X1, and that all dollar amounts arein thousands of dollars.

Required:

1. Calculate the cost per unit of merchandise inventory

2. Prepare a schedule showing the quantity of sales, ending inventory, beginning inventory and the quantity of product purchased in May, June, and July.

3. Use the price per unit of inventory purchased and the quantity purchased to determine the expenditure for purchases in May, June, and July.

4. Calculate the percentages of sales the company expects to collect in the month of the sale and in the two months following the sale. What is the percentage of uncollectible sales? Assume that the percentages calculated for the month for which data is provided also apply to sales for any month of the year.

5. Calculate the percentages of May and June merchandise purchases the company expects to pay in June.

6. Calculate the balance in the accounts receivable on June 30. Assume all receivables are due to sales on account.

7. Calculate the balance in the cash account on June 30, based on the transactions projected to occur in June. Use the collection and disbursement percentages previously calculated. Assume that fixed expenses occur evenly in each month of the year.

8. Prepare a cash budget for July, in good form. Use the collection and disbursement percentages previously calculated.

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Information From Accounting Records and Planning Documents Dr Cr Extracts From the May 31 Adjusted Trial Balance May 31 Cash 3,500 Merchandise inventory 8,000 Accounts receivable 27,200 Accounts payable 3,500 Extracts From the General Journal April 30 Accounts receivable, April sales 32,000 Revenue 32,000 15,680 Cash Accounts receivable, April sales 15,680 Bad debt expense, percentage of April sales 1,280 Allowance for doubtful accounts 1,280 May 31 Accounts receivable, May sales 48,000 Revenue 48,000 Cash 36,320 Accounts receivable, April sales 12,800 Accounts receivable, May sales 23,520 Merchandise inventory 14,000 $14,000 Accounts payable, May purchases Accounts payable, May purchases 10,500 Cash, payment May purchases 10,500 Projected Entries to the General Journal for Selected Anticipated Transactions as per Master Budget June 30 Accounts receivable, June sales 64,000 Revenue 64,000 Cost of sales for June 16,000 Inventory 16,000 Accounts payable, May purchases 3,500 Cash, May purchases 3,500 Cash 2,240 Accounts receivable, April sales 2,240 July 31 Accounts receivable, July sales 56,000 Sales revenue 56,000 August 31 Accounts receivable, August sales 72,000 Sales revenue 72,000 Period fixed expenses, August 2,000 Accumulated depreciation, August 500 Cash 1,500 Variable operating expenses (percent of sales) 7,560 Cash 7,560