Following information relates to Acco Co. a. Beginning cash balance on July 1: $
ID: 2467784 • Letter: F
Question
Following information relates to Acco Co. a. Beginning cash balance on July 1: $50,000. b. Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month, and 20% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,720,000; June (actual), $1,200,000; and July (budgeted), $1,400,000. c. Payments on merchandise purchases: 60% in the month of purchase and 40% in the month following purchase. Purchases amounts are: June (actual), $700,000; and July (budgeted), $750,000. d. Budgeted cash disbursements for salaries in July: $275,000. e. Budgeted depreciation expense for July: $36,000. f. Other cash expenses budgeted for July: $200,000. g. Accrued income taxes due in July: $80,000. h. Bank loan interest paid July 31: $6,600. Additional Information: a. Cost of goods sold is 55% of sales. b. Inventory at the end of June is $80,000 and at the end of July is $60,000. c. Salaries payable on June 30 are $50,000 and are expected to be $60,000 on July 31. d. The equipment account balance is $1,600,000 on July 31. On June 30, the accumulated depreciation on equipment is $280,000. e. The $6,600 cash payment of interest represents the 1% monthly expense on a bank loan of $660,000. f. Income taxes payable on July 31 are $30,720, and the income tax rate applicable to the company is 30%. g. The only other balance sheet accounts are: Common Stock, with a balance of $600,000 on June 30; and Retained Earnings, with a balance of $964,000 on June 30.
Prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31.
Explanation / Answer
Acco Co. All Amounts in $ Budgeted Income Statement for July Cash Balance Working Sales 1400000 Opening Cash Balance 50000 Decrease in Inventory 20000 Collections from Sales Cost of Goods Sold @ 55% 770000 May 344000 Gross Contribution 610000 June 600000 Less : Expenses July 420000 1364000 Salaries 335000 1414000 Depreciation 36000 Other Cash Expenses 200000 Purchase Payments Interest on Loan 6600 577600 June 280000 July 450000 730000 32400 Salary Disbursements 325000 Income Tax @ 30% 9720 Other Cash Expenses 200000 Retained Earnings 22680 Income Tax Payments 80000 Bank Loan Interest 6600 1341600 Closing Cash Balance 72400 Budgeted Balance Sheet as on July 31 Assets Current Assets Cash 72400 Accounts Receivable 1220000 Inventory 60000 Total Current Assets 1352400 Fixed Assets less Accumulated Depreciation 1284000 Total Assets 2636400 Liabilities Current Liabilities Accounts Payable 300000 Income Taxes Payable 30720 Accrued Salaries 60000 Total Current Liabilities 390720 Bank Loan 660000 Shareholders' Equity Common Stock 600000 Retained Earnings 985680 Total Liabilities and 2636400 Shareholders' Equity