Little Flower Establishment would like to prepare a cash budget for July and August. The following information has been gathered:

(i) Cash balance as of July 1:$ 1,440,000

(ii) Forecasted sales are as follows:

May June July August

Cash sales............................ $1,600,000 $1,920,000 $1,920,000 $1,920,000

Credit sales.......................... 1,280,000 1,440,000 1,600,000 1,920,000

Total..................................... $ 2,880,000 $ 3,360,000 $ 3,520,000 $ 3,840,000

(iii) Credit sales are collected 40% in the month of the sale, 35% in the month following the sale, and 25% in the second month following the sale.

(iv) Purchases for these months (July August) are $ 1,900,000 and $ 1,900,000 respectively which is paid on the same month of purchases made

(v) Monthly cash operating expenses is $ 320,000

(vi) Income taxes to be paid in cash in August $ 240,000

Required

(a) Prepare a schedule of cash collections (cash and credit collections) for July and August. (15 marks)

(b) Prepare a Cash Budget for months July and August