Digital Ltd is a retailer of a popular digital watch and provides you with the following information for the preparation of its 1st quarter budget: July - September. Budgeted sales are as follows: Month Sales ($) Units sold May 250,000 2,500 June 280,000 2,800 July 350,000 3,500 August 400,000 4,000 September 300,000 3,000 October 360,000 3,600 Additional information: i) Purchases are budgeted at $5.00 per unit and are paid for in full in the month after purchase. ii) Ending inventory 40% of the next months sales. v) Sales (which are all on credit) are collected as follows: 60% in the month of sale; 30% in the month after the sale; 5% in the second month after the sale. v) The balance in the bank account as at 30 June is $10,000.

Required: a) Prepare a purchases budget (in units and $) for the 1st quarter. (Purchases are based on expected sales).

b) Prepare the schedule of expected cash collections from Accounts Receivable for 1st quarter.