(1).

A merchandising firm by the name of Star Wars Enterprises, had an inventory of 49,000 units on March 31, and it had accounts receivable totaling $88,500. Sales, in units, have been budgeted as follows for the next four months:

April

54,000

May

65,000

June

89,000

July

85,000

To be enforced in April, Star Wars board of directors has established a policy that states that the inventory at the end of each month should contain 35% of the units required for the following month's budgeted sales. $2.5 is the selling price per unit. One-Quarter of sales are paid for by customers in the month of the sale; the balance is collected in the following month.

Required:

1. a merchandise purchases budget showing how many units should be purchased for

each of the months April, May, and June.

2.a schedule of expected cash collections for each of the months April, May, and June.

(2)

Fonsey Corporation, a merchandising company, has provided the following budget data:

Purchases

Sales

Month

$39,500

$69,000

January

47,200

65,900

February

37,500

61,200

March

54,000

79,850

April

59,500

72,600

May

Collections from customers are normally 59% in the month of sale, 16% in the month following the sale, and 22% in the second month following the sale. It is expected that the balance be uncollectible. Fonsey pays for purchases in the month following the purchase. Cash disbursements for expenses other than merchandise purchases are expected to be $13,900 for May. Fonsey's cash balance on May 1 was $28,500.

Required:

1.Compute the expected cash collections during May.

2.Compute the expected cash balance on May 31.