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

Purchases

Sales

January

$42,000

$72,000

February

48,000

66,000

March

36,000

60,000

April

54,000

78,000

May

60,000

66,000

Collections from customers are normally 70% in the month of sale, 20% in the month following the sale, and 9% in the second month following the sale. The balance is expected to be uncollectible.

Montero pays for purchases in the month following the purchase.

Expenses other than merchandise purchases are expected to be $20,400 for May which included $4,000 in depreciation expense.

During May, Montero plans to purchase $3,000 of new computer equipment and to pay $1,500 in dividends to investors.

Montero's cash balance on May 1 was $23,000.

Required:

a) Compute the expected cash collections during May.

b) Prepare a cash budget for May.