Following information relates to Acco Co. a. Beginning cash balance on July 1: $
ID: 2583058 • Letter: F
Question
Following information relates to Acco Co.
a. Beginning cash balance on July 1: $45,000.
b. Cash receipts from sales: 24% is collected in the month of sale, 50% in the next month, and 26% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,548,000; June (actual), $1,080,000; and July (budgeted), $1,260,000.
c. Payments on merchandise purchases: 48% in the month of purchase and 52% in the month following purchase. Purchases amounts are: June (actual), $387,000; and July (budgeted), $600,000.
d. Budgeted cash disbursements for salaries in July: $189,900.
e. Budgeted depreciation expense for July: $10,800.
f. Other cash expenses budgeted for July: $135,000.
g. Accrued income taxes due in July: $80,000 (related to June).
h. Bank loan interest paid July 31: $5,940.
Additional Information:
a. Cost of goods sold is 35% of sales.
b. Inventory at the end of June is $72,000 and at the end of July is $231,000.
c. Salaries payable on June 30 are $45,000 and are expected to be $36,000 on July 31.
d. The equipment account balance is $1,440,000 on July 31. On June 30, the accumulated depreciation on equipment is $252,000.
e. The $5,940 cash payment of interest represents the 1% monthly expense on a bank loan of $594,000.
f. Income taxes payable on July 31 are $194,544, and the income tax rate applicable to the company is 40%.
g. The only other balance sheet accounts are: Common Stock, with a balance of $643,240 on June 30; and Retained Earnings, with a balance of $964,800 on June 30.
Prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31.
Explanation / Answer
Calculation of cash receipts from sales
Calculation of cash receipts from sales
Collected in 31-Jul Total Sales May June July Accounts Receivables Credit sale from May $1,548,000 $371,520 $774,000 $402,480 June $1,080,000 $259,200 $540,000 $280,800 July $1,260,000 $302,400 $957,600 Totals $3,888,000 $371,520 $1,033,200 $1,244,880 $1,238,400 Calculation of cash payments for merchandise Paid in 31-Jul Total Sales June July Accounts Payable Purchases From June $387,000 $185,760 $201,240 July $600,000 $288,000 $312,000 Totals $987,000 $185,760 $489,240 $312,000 Preparation of cash budget for the month of July Beginning Cash balance as on July 1 $45,000 Add : Cash Receipts - Receipts from sale $1,244,880 Total Cash Receipts $1,289,880 Less : Cash Payments - Payments for Merchandise $489,240 - Salaries $189,900 - Other expenses $135,000 - Bank Loan Interest $5,940 Total Cash payments $820,080 Ending Cash balance as on July 31 $469,800