All sales of Dunn’s Building Supplies (DBS) are made on credit. Sales are billed twice monthly, on the 10th of the month for the last half of the prior month’s sales and on the 20th of the month for the first half of the current month’s sales. The terms of all sales are 2/10, net 30. Based on past experience, the collection experience of accounts receivable is as follows: 

Within the discount period............,80% 

On the 30th day..............................18% 

Uncollectible....................................2% 

The sales value of shipments for May 2010 was $750,000. The forecast sales for the next four months are 

June            $800,000 

July               900,000 

August         900,000 

September  600,000 

DBS’s average markup on its products is 20 percent of the sales price. DBS purchases merchandise for resale to meet the current month’s sales demand and to maintain a desired monthly ending inventory of 25 percent of the next month’s sales. All purchases are on credit with terms of net 30. DBS pays for one-half of a month’s purchases in the month of purchase and the other half in the month following the purchase. 

All sales and purchases occur uniformly throughout the month. 1. How much cash can DBS plan to collect from accounts receivable collections during July 2010? 

2. How much can DBS plan to collect in September from sales made in August 2010? 

3. Compute the budgeted dollar value of DBS’s inventory on August 31, 2010. 

4. How much merchandise should DBS plan to purchase during June 2010? 

5. How much should DBS budget in August 2010 for the payment of merchandise?