Following information relates to Sanchez Co. Cash receipts from sales: 27% is co

Question

Following information relates to Sanchez Co.

  

Cash receipts from sales: 27% is collected in the month of sale, 50% in the next month, and 23% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,376,000; June (actual), $960,000; and July (budgeted), $1,120,000.

Payments on merchandise purchases: 54% in the month of purchase and 46% in the month following purchase. Purchases amounts are: June (actual), $344,000; and July (budgeted), $600,000.

  

The equipment account balance is $1,280,000 on July 31. On June 30, the accumulated depreciation on equipment is $224,000.

The $5,280 cash payment of interest represents the 1% monthly expense on a long-term bank loan of $528,000.

Income taxes payable on July 31 are $112,896, and the income tax rate applicable to the company is 30%.

The only other balance sheet accounts are: Common Stock, with a balance of $513,440 on June 30; and Retained Earnings, with a balance of $857,600 on June 30.

Following information relates to Sanchez Co.

Explanation / Answer

Hi,

Please find the answer as follows;

Cash Budget for the Month of July

Thanks.

Opening Cash Balance 40000 Cash Receipts from Sales
May Sales (1376000*23%) 316480 June Sales (960000*50%) 480000 July Sales (1120000*27%) 302400 Total Cash Available (A) 1138880 Cash Disbursements
Payments for Merchandise
June Purchases (344000*46%) 158240 July Purchases (600000*54%) 324000 Salaries 168800 Other Expenses 120000 Accrued Taxes 80000 Interest on Bank Loan 5280 Total Cash Disbursements (B) 856320 Ending Cash Balance (A) - (B) 282560

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