Retailer Budget D. Tomlinson Retail seeks your assistance in developing cash and other bud...

Retailer Budget D. Tomlinson Retail seeks your assistance in developing cash and other budget information for May, June, and July. The store expects to have the following balances at the end of April:

The firm follows these guidelines in preparing its budgets:

• Sales. All sales are on credit with terms of 3/10, n/30. Tomlinson bills customers on the last day of each month. The firm books receivables at gross amounts and collects 60% of the billings within the discount period, 25% by the end of the month, and 9% by the end of the second month. The firm’s experience suggests that 6% is likely to be uncollectible and is written off at the end of the third month.

---

• Purchases and expenses. All purchases and expenses are on open account. The firm pays its payables over a two-month period with 54% paid in the month of purchase. Each month’s units of ending inventory should equal 130% of the next month’s cost of sales. The cost of each unit of inventory is $20. Selling and administrative expenses, of which $2,000 is depreciation, equal 15% of the current month’s sales.

Actual and projected sales follow:

Required

1. Prepare schedules showing budgeted merchandise purchases for May and June.

---

2. Prepare a schedule showing budgeted cash disbursements during June.

---

3. Prepare a schedule showing budgeted cash collections during May.

---

4. Determine gross and net balances of accounts receivable on May 31.

(CMA Adapted)