Question E22-28: Purchase and Cash Budget

On July 1, MTC Wholesalers has a cash balance of $125,000 and accounts payable of $160,000, and Inventory of $78,000. Actual sales for May and June, and budgeted sales for July, August, September, and October are:

Month	Actual Sales	Month	Budgeted Sales
May	$250,000	July	$260,000
June	$225,000	August	$240,000
		September	$270,000
		October	$275,000

All sales are on credit with 60% collected during the month of sale, 30% collected during the next month, and 10% collected during the second month following the month of sale. The cost of goods sold averages 60% of sales revenue. Ending inventory is one-half of the next months predicted cost of sales. The other half of the merchandise is acquired during the month of sale. All purchases are paid for in the month after purchase. Operating costs are estimated at $95,000 each month and are paid during the month incurred.

Prepare purchases and cash budgets for July, August, and September.