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 $25.00 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	4,400
	Merchandise inventory	9,800
	Accounts receivable	29,000
	Accounts payable		4,200
Extracts From the General Journal
April 30	Accounts receivable, April sales	41,000
	Revenue		41,000
	Cash	20,090
	Accounts receivable, April sales		20,090
	Bad debt expense, percentage of April sales	1,640
	Allowance for doubtful accounts		1,640
May 31	Accounts receivable, May sales	87,500
	Revenue		87,500
	Cash	59,275
	Accounts receivable, April sales		16,400
	Accounts receivable, May sales		42,875
	Merchandise inventory	16,800
	Accounts payable, May purchases		16,800
	Accounts payable, May purchases	12,600
	Cash, payment May purchases		12,600
Projected Entries to the General Journal for Selected
Anticipated Transactions as per Master Budget
June 30	Accounts receivable, June sales	122,500
	Revenue		122,500
	Cost of sales for June	19,600
	Inventory		19,600
	Accounts payable, May purchases	4,200
	Cash, May purchases		4,200
	Cash	2,870
	Accounts receivable, April sales		2,870
July 31	Accounts receivable, July sales	90,750
	Sales revenue		90,750
August 31	Accounts receivable, August sales	115,750
	Sales revenue		115,750
	Period fixed expenses, August	2,450
	Accumulated depreciation, August		725
	Cash		1,725
	Variable operating expenses (percent of sales)	11,575
	Cash		11,575

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.)