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 $18.00 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	3,700
	Merchandise inventory	8,400
	Accounts receivable	27,600
	Accounts payable		3,675
Extracts From the General Journal
April 30	Accounts receivable, April sales	34,000
	Revenue		34,000
	Cash	16,660
	Accounts receivable, April sales		16,660
	Bad debt expense, percentage of April sales	1,360
	Allowance for doubtful accounts		1,360
May 31	Accounts receivable, May sales	56,700
	Revenue		56,700
	Cash	41,383
	Accounts receivable, April sales		13,600
	Accounts receivable, May sales		27,783
	Merchandise inventory	14,700
	Accounts payable, May purchases		14,700
	Accounts payable, May purchases	11,025
	Cash, payment May purchases		11,025
Projected Entries to the General Journal for Selected
Anticipated Transactions as per Master Budget
June 30	Accounts receivable, June sales	75,600
	Revenue		75,600
	Cost of sales for June	16,800
	Inventory		16,800
	Accounts payable, May purchases	3,675
	Cash, May purchases		3,675
	Cash	2,380
	Accounts receivable, April sales		2,380
July 31	Accounts receivable, July sales	64,080
	Sales revenue		64,080
August 31	Accounts receivable, August sales	82,080
	Sales revenue		82,080
	Period fixed expenses, August	2,100
	Accumulated depreciation, August		550
	Cash		1,550
	Variable operating expenses (percent of sales)	8,208
	Cash		8,208

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

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

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.
	Balance

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.)
	CASH BUDGET FOR JULY CASH BUDGET MONTH ENDED JULY 31,20XX
	July cash collections
	July cash Disbursements for merchandise Purchases:
	July Purchases
	June Purchases
	August Purchases
	Selling and administration expenses:
	Fixed Expenses
	Variable Expenses
	ending Cash Balance