A company sells cars. The data following data are taken from a statement of financial position at March 31, 2019

Cash $6000

Accounts Receivable $18000

Inventories $34000

Accounts payable $19750

Additional info:

1) Actual and expected sales are:

March (Actual) $40000

April $50000

May $62000

June $80000

2) 30% of sales are on credit, the remaining are in cash. All credit sales are collected in the following month.

3) The ending inventory should be 70% of the following month's sales cost of goods sold.

4) Gross margin is expected to be 20% of sales

5) Of each month's purchases, 40% are paid in cash, and the remaining is paid for in the month following purchase,

6) Monthly operating expenses are: salaries in commissions, 10% of sales; rent, $2000 and other expenses, excluding depreciation equipment, equal to 8% of sales. All paid in the month where they are incurred. Monthly depreciation equipment is $800.

7) Equipment will be purchased in April $1500 in cash

8) The company has a policy that the ending cash balance in each month must be at least $3500. The company can borrow at the beginning of each month. All repayments are made at the end of the month. All borrowings and repayments are made in increments of $100. The interest rate on borrowings is 5% per year with interest being paid in the month of borrowings.

Question: Prepare the following budgets

1. Cash collections budget

	April	May
Cash sales
Credit sales
Total

2. Purchases Budget

	April	May	June
Desired ending inventory
Cost of goods sold
Beginning inventory
Total Purchases

Could anyone give an explanation on how to prepare the budgets step by step?