April	May	June	July
Sales	600,000	900,000	500,000	400,000
Cost of Goods sold	420,000	630,000	350,000	280,000
Gross Margin	180,000	270,000	150,000	120,000
Selling and admin expenses
selling expense	79,000	120,000	62,000	51,000
administrative	45,000	52,000	41,000	38,000
total selling and administrative expenses	124,000	172,000	103,000	89,000
net operating income	56,000	98,000	47,000	31,000

a. sales are 20% for cash and 80% on account

b. sales on account are collected over a three month period with10% collected in the month of sale: 70% in the first monthfollowing the sale, and the remaining 20% collected in the secondmonth following the sale. Feb. sales were 200,000 and march was300,000

c. Inventory purchases are paid within 15 daystherefore, 50% of a month's inventory purchases are paid for in themonth of purchase. The remaining 50% is paid in the followingmonth. Accounts payable on March 31 for the month of March was126,000

d. Each month's ending inventory must equal 20% of the cost ofthe merchandise to be sold in the following month. the merchandiseinventory at march 31 was 84,000

e. dividends of 49,000 will be declared and paid in April

f. Land costing 16,000 will be purchased for cash in May

g. The cash balance at March 31 is 52,000 the companymust maintain a cash balance of at least 40,000 at the endof each month.

h. the company has an agreement with a localbank that allows the company to borrow in increments of $1,000 atthe beginning of each month, up to a total loan balance of 200,000.The interest rate on these loans is 1% each month and forsimplicity we will assume that interest is not compounded. Thecompany would, as far as it is able, repay the loan, plusaccumulated interest at the end of each quarter.

1. Prepare a merchandise purchase budget for April, May andJune.

2. Prepare a schedule of expected cash disbursements formerchandise purchases for April, May and June and for the quarterin total.

3. Prepare a cash budget for the month of May