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 $24.00 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	4,300
	Merchandise inventory	9,600
	Accounts receivable	28,800
	Accounts payable		4,125
Extracts From the General Journal
April 30	Accounts receivable, April sales	40,000
	Revenue		40,000
	Cash	19,600
	Accounts receivable, April sales		19,600
	Bad debt expense, percentage of April sales	1,600
	Allowance for doubtful accounts		1,600
May 31	Accounts receivable, May sales	82,800
	Revenue		82,800
	Cash	56,572
	Accounts receivable, April sales		16,000
	Accounts receivable, May sales		40,572
	Merchandise inventory	16,500
	Accounts payable, May purchases		16,500
	Accounts payable, May purchases	12,375
	Cash, payment May purchases		12,375
Projected Entries to the General Journal for Selected
Anticipated Transactions as per Master Budget
June 30	Accounts receivable, June sales	115,200
	Revenue		115,200
	Cost of sales for June	19,200
	Inventory		19,200
	Accounts payable, May purchases	4,125
	Cash, May purchases		4,125
	Cash	2,800
	Accounts receivable, April sales		2,800
July 31	Accounts receivable, July sales	86,880
	Sales revenue		86,880
August 31	Accounts receivable, August sales	110,880
	Sales revenue		110,880
	Period fixed expenses, August	2,400
	Accumulated depreciation, August		700
	Cash		1,700
	Variable operating expenses (percent of sales)	11,088
	Cash		11,088

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.)

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 $24.00 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 DrCrExtracts From the May 31 Adjusted Trial Balance May 31Cash4,300 Merchandise inventory9,600 Accounts receivable28,800 Accounts payable 4,125 Extracts From the General Journal April 30Accounts receivable, April sales40,000 Revenue 40,000 Cash19,600 Accounts receivable, April sales 19,600 Bad debt expense, percentage of April sales1,600 Allowance for doubtful accounts 1,600 May 31Accounts receivable, May sales82,800 Revenue 82,800 Cash56,572 Accounts receivable, April sales 16,000 Accounts receivable, May sales 40,572 Merchandise inventory16,500 Accounts payable, May purchases 16,500 Accounts payable, May purchases12,375 Cash, payment May purchases 12,375 Projected Entries to the General Journal for SelectedAnticipated Transactions as per Master Budget June 30Accounts receivable, June sales115,200 Revenue 115,200 Cost of sales for June19,200 Inventory 19,200 Accounts payable, May purchases4,125 Cash, May purchases 4,125 Cash2,800 Accounts receivable, April sales 2,800 July 31Accounts receivable, July sales86,880 Sales revenue 86,880 August 31Accounts receivable, August sales110,880 Sales revenue 110,880 Period fixed expenses, August2,400 Accumulated depreciation, August 700 Cash 1,700 Variable operating expenses (percent of sales)11,088 Cash 11,088

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.)

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