Retailer Budget D. Tomlinson Retail seeks your assistance in developing cash and other budgetinformation for May, June, and July. The store expects to have the following balances at the end ofApril:Cash $ 5,500Accounts receivable 437,000Inventories 309,400Accounts payable 133,055The 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 ofeach month. The firm books receivables at gross amounts and collects 60% of the billings withinthe discount period, 25% by the end of the month, and 9% by the end of the second month. Thefirm’s experience suggests that 6% is likely to be uncollectible and is written off at the end of thethird month.∙ Purchases and expenses. All purchases and expenses are on open account. The firm pays its payables over a 2-month period with 54% paid in the month of purchase. Each month’s units of endinginventory should equal 130% of the next month’s cost of sales. The cost of each unit of inventory is$20. Selling, general, and administrative (SG&A) expenses, of which $2,000 is depreciation, equal15% of the current month’s sales.Actual and projected sales follow:Month Dollars Units Month Dollars UnitsMarch $354,000 11,800 June $342,000 11,400April 363,000 12,100 July 360,000 12,000May 357,000 11,900 August 366,000 12,200Required1. 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.

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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:
Cash $ 5,500
Accounts receivable 437,000
Inventories 309,400
Accounts payable 133,055
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 2-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, general, and administrative (SG&A) expenses, of which $2,000 is depreciation, equal
15% of the current month’s sales.
Actual and projected sales follow:
Month Dollars Units Month Dollars Units
March $354,000 11,800 June $342,000 11,400
April 363,000 12,100 July 360,000 12,000
May 357,000 11,900 August 366,000 12,200
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.

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