D. Tomlinson Retail seeks your assistance in developing cash and other budget information for May, June, and July. The store expects to have the following balances at the end of April:

Cash $ 4,000 Accounts receivable 860,000 Inventories 504,000 Accounts payable 270,664

The firm follows these guidelines in preparing its budgets:

Sales. All sales are on credit with terms of 3/10, n/30. Tomlinson bills customers on the last day of each month. The firm books receivables at gross amounts and collects 60% of the billings within the discount period, 25% by the end of the month, and 9% by the end of the second month. The firms experience suggests that 6% is likely to be uncollectible and is written off at the end of the third month. Purchases and expenses. All purchases and expenses are on open account. The firm pays its payables over a 2-month period with 54% paid in the month of purchase. Each months units of ending inventory should equal 105% of the next months cost of sales. The cost of each unit of inventory is $40. Selling, general, and administrative (SG&A) expenses, of which $1,000 is depreciation, equal 15% of the current months sales.

Actual and projected sales follow:

Month Dollars Units Month Dollars Units March $714,000 11,900 June $690,000 11,500 April 732,000 12,200 July 726,000 12,100 May 720,000 12,000 August 738,000 12,300

Required:

1. Prepare schedules showing budgeted merchandise purchases for May and June.

2. Prepare a schedule showing budgeted cash disbursements during June.

3. Prepare a schedule showing budgeted cash collections during May.

4. Determine gross and net balances of accounts receivable on May 31.