Ryan Richards, controller for Grange Retailers, has assembled the following data to assist in the preparation of a cash budget for July and August 2005. As at July 1st the company has a beginning cash balance of $ 13 500:

Sales: May (actual) $100,000

June (actual) 120,000

July (estimated) 170,000

August (estimated) 100,000

September (estimated) 135,000

October (estimated) 110,000

The companys gross margin is 20%. Each month, 30 percent of sales are collected in cash and 70 percent are on credit. The collection pattern for credit sales is 20 percent in the month of sale, 50 percent in the following month, and 30 percent in the second month following the sale. The records for purchases and beginning inventory for June 1st and projected figures for the coming quarter:

June July August September

Cost of sales $96,000 136,000 80,000 108,000

Desired end Inv 68,000 ?(a) ?( d ) 44,000

Total requirements 164,000 ? (b) 134,000 152,000

Less beg. Inventory 80,000 36,000 ? (e ) 54,000

Purchases 84,000 ?( c ) ? ( f) 98,000

The desired ending inventory is 50% of the next months cost of sales. Inventory purchases are paid for in the month following the purchase and no discounts are taken.

The under noted expenses are incurred each month and are paid in the same month.

Salaries and wages 10,000

Depreciation on plant and equipment 4,000

Utilities 1,000

Other expenses 1,700

Additional information:

A new truck for $ 120,000 will be bought and paid for in July and an old truck will disposed in the same month for cash proceeds of $ 22,000.

Common shares were sold for $ 100,000 and cash was received in August 2005.

Property taxes of $15,000 are to be paid 50% in July and 50% in August 2005.

Advertising fees of $12,000 were paid 50% in July and 50% in August 2005.

Dividends for $ 3,000 are to be paid in August 2005.

The company has a policy of maintaining a minimum cash balance of $10,000. If necessary, it will borrow to meet its short-term needs. All borrowing is done at the beginning of the month. All payments on principal and interest are made at the end of a month. The annual interest rate is 9 percent. The bank will finance exact amounts needed. If there is excess cash the borrowed funds can be repaid.

Instructions:

a) Provide your answers for the purchases table indicating letters a to f.

b) Prepare a schedule for cash collections for JULY and AUGUST only.