You have been asked to prepare the monthly cash budget for June and July for the Merchandise and Mercantile Company. The company sells a unique product that is specially made for it by a major product manufacturer. The selling price is $27.00 per unit. All sales are on account.

Merchandise purchases are also on account. The policy of the company is to purchase sufficient quantity of product to ensure that each months ending inventory is 50% of the following months expected sales quantity.

The assignment file contains extracts from the general journal showing the journal entries pertaining to certain relevant transactions that have occurred and a set of entries the bookkeeper has provided that indicate the transactions expected to occur affecting cash, accounts payable, accounts receivable, and merchandise inventory accounts due to the projected sales revenues and projected merchandise purchases on the master budget. This analysis, with other additional data, is shown below. Assume today is May 31, 20X1, and that all dollar amounts are in thousands of dollars.

Information From Accounting Records and Planning Documents
		Dr	Cr
Extracts From the May 31 Adjusted Trial Balance
May 31	Cash	4,600
	Merchandise inventory	10,200
	Accounts receivable	29,400
	Accounts payable		4,350
Extracts From the General Journal
April 30	Accounts receivable, April sales	43,000
	Revenue		43,000
	Cash	21,070
	Accounts receivable, April sales		21,070
	Bad debt expense, percentage of April sales	1,720
	Allowance for doubtful accounts		1,720
May 31	Accounts receivable, May sales	97,200
	Revenue		97,200
	Cash	64,828
	Accounts receivable, April sales		17,200
	Accounts receivable, May sales		47,628
	Merchandise inventory	17,400
	Accounts payable, May purchases		17,400
	Accounts payable, May purchases	13,050
	Cash, payment May purchases		13,050
Projected Entries to the General Journal for Selected
Anticipated Transactions as per Master Budget
June 30	Accounts receivable, June sales	137,700
	Revenue		137,700
	Cost of sales for June	20,400
	Inventory		20,400
	Accounts payable, May purchases	4,350
	Cash, May purchases		4,350
	Cash	3,010
	Accounts receivable, April sales		3,010
July 31	Accounts receivable, July sales	98,550
	Sales revenue		98,550
August 31	Accounts receivable, August sales	125,550
	Sales revenue		125,550
	Period fixed expenses, August	2,550
	Accumulated depreciation, August		775
	Cash		1,775
	Variable operating expenses (percent of sales)	12,555
	Cash		12,555

Required:

1.	Calculate the cost per unit of merchandise inventory.

2.	Prepare a schedule showing the quantity of sales, ending inventory, beginning inventory and the quantity of product purchased in May, June, and July.

3.	Use the price per unit of inventory purchased and the quantity purchased to determine the expenditure for purchases in May, June, and July.

4.	Calculate the percentages of sales the company expects to collect in the month of the sale and in the two months following the sale. What is the percentage of uncollectible sales? Assume that the percentages calculated for the month for which data is provided also apply to sales for any month of the year.

5.	Calculate the percentages of May and June merchandise purchases the company expects to pay in June.

6.	Calculate the balance in the accounts receivable on June 30. Assume all receivables are due to sales on account.

7.	Calculate the balance in the cash account on June 30, based on the transactions projected to occur in June. Use the collection and disbursement percentages previously calculated. Assume that fixed expenses occur evenly in each month of the year.

8.	Prepare a cash budget for July, in good form. Use the collection and disbursement percentages previously calculated. (Amounts to be deducted should be indicated by a minus sign.)