Paul’s Pool Service provides pool cleaning, chemical application, and pool repai
ID: 2556738 • 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, 70 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:
June 1 cash balance $15,500.
June 1 supplies on hand $4,100.
June 1 accounts receivable $8,600.
June 1 accounts payable $4,000.
Estimated sales for June, July, and August are $25,800, $38,700, and $41,000, respectively.
Sales during May were $23,800, and sales during April were $17,200.
Estimated purchases for June, July, and August are $9,600, $18,200, and $12,900, respectively.
Purchases in May were $5,300.
Required:
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
Schedule of Expected Cash Collection June July August Total Estimated Sales $25,800 $38,700 $41,000 $105,500 Account Receivable, Beginning Balance $8,600 $8,600 June Sales $18,060 $6,450 $1,290 $25,800 July Sales $27,090 $9,675 $36,765 August Sales $28,700 $28,700 Total Cash Collection $26,660 $33,540 $39,665 $99,865 Schedule of Expected Cash Payment June July August Total Estimated Purchase 9600 18200 12900 40700 Account payable, Beginning Balance $4,000 4000 June purchase $4,800 $4,800 9600 July Purchase $9,100 $9,100 18200 August Purchase $6,450 6450 Total Cash Collection $8,800 $13,900 $15,550 $38,250 Computation of Cash Balance on 31 Aug Opening Cash Balance $15,500 Cash Collection $99,865 Cash Payment -$38,250 Closing Cash Balance $77,115 Computation of Account Receivable as on 31 Aug 5% of July Sales ($38700*5%) $1,935 30 % of August Sales ($41000*30%) $12,300 Closing Account Receivable Balance $14,235 Computation of Account Payable as on 31 Aug 50% of August Purchase $6,450 Closing Account Receivable Balance $6,450