Question 2 (Total 34 marks)

The treasurer of WW Company is preparing cash budget. The following data has been assembled.

Actual sales for the last two months and budgeted sales for third quarter are as follow (all sales are on account):

May (actual: $40 selling price per unit, 7,000 units sold)

June (actual: $40 selling price per unit, 8,000 units sold)

July (budgeted: $50 selling price per unit, 8,000 units sold) August (budgeted: $50 selling price per unit, 9,600 units sold) September (budgeted: $50 selling price per unit, 9,000 units sold)

Past experience shows that 20% of a months sales are collected in the month of sale, 70% in the month following sale, and 5% in the second month following sale. The remainder is uncollectible.

Required:

Prepare the sales budget with a schedule of expected cash collections (cash receipts) for July, August and September and total for the third quarter (July to September).