Paul’s Pool Service provides pool cleaning, chemical application, and pool repai
ID: 2514427 • Letter: P
Question
Paul’s Pool Service provides pool cleaning, chemical application, and pool repairs for residential customers. Clients are billed weekly for services provided and usually pay 70 percent of their fees in the month the service is provided. In the month following service, Paul collects 25 percent of service fees. The final 5 percent is collected in the second month following service. Paul purchases his supplies on credit, and pays 50 percent in the month of purchase and the remaining 50 percent in the month following purchase. Of the supplies Paul purchases, 85 percent is used in the month of purchase, and the remainder is used in the month following purchase.
The following information is available for the months of June, July, and August, which are Paul’s busiest months:
1. Compute budgeted cash receipts and budgeted cash payments for each month.
2. Compute the balances necessary to prepare a budgeted balance sheet for August 31 for each of the following accounts
Explanation / Answer
Solution 1:
Note: It is assumed that Cash receipt from Opening Account receivables in July is 5% of May Sale (i.e. $26800* 5% =$1340) and remaining Accounts receivables (i.e. $9600-$1340 = $8260) are received in June month.
Solution 2:
Schedule of Budgeted Cash Receipts and Budgeted Cash Payments Particulars June July August Total Budgeted Cash Receipts Cash received for Opening account Receivable $8,260.00 $1,340.00 $9,600.00 Cash received for june Sale $20,160.00 $7,200.00 $1,440.00 $28,800.00 Cash received for july Sale $30,240.00 $10,800.00 $41,040.00 Cash received for August Sale $32,200.00 $32,200.00 Total Budgeted Cash receipts $28,420.00 $38,780.00 $44,440.00 $111,640.00 Budgeted Cash Payments Cash payment for Account Payable $4,500.00 $4,500.00 Cash Payment for June Purchases $5,300.00 $5,300.00 $10,600.00 Cash Payment for July Purchases $10,100.00 $10,100.00 $20,200.00 Cash Payment for August Purchases $7,200.00 $7,200.00 Total Budgeted Cash Payments $9,800.00 $15,400.00 $17,300.00 $42,500.00