Monday, 9 February 2015

Following information relates to Acco Co. a. Beginning cash balance on July 1: $40,000. 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), $1,376,000; June (actual), $960,000; and July (budgeted), $1,120,000.

Following information relates to Acco Co.
 
a. Beginning cash balance on July 1: $40,000.
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), $1,376,000; June (actual), $960,000; and July (budgeted), $1,120,000.
c.
Payments on merchandise purchases: 60% in the month of purchase and 40% in the month following purchase. Purchases amounts are: June (actual), $344,000; and July (budgeted), $600,000.
d. Budgeted cash disbursements for salaries in July: $168,800.
e. Budgeted depreciation expense for July: $9,600.
f. Other cash expenses budgeted for July: $120,000.
g. Accrued income taxes due in July: $80,000 (related to June).
h. Bank loan interest paid July 31: $5,280.
 
Additional Information:
a. Cost of goods sold is 44% of sales.
b. Inventory at the end of June is $64,000 and at the end of July is $171,200.
c. Salaries payable on June 30 are $40,000 and are expected to be $32,000 on July 31.
d.
The equipment account balance is $1,280,000 on July 31. On June 30, the accumulated depreciation on equipment is $224,000.
e.
The $5,280 cash payment of interest represents the 1% monthly expense on a bank loan of $528,000.
f.
Income taxes payable on July 31 are $99,456, 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 $464,000 on June 30; and Retained Earnings, with a balance of $857,600 on June 30.
 
Prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31.
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Explanation:
Budgeted Income Statement supporting calculations
  Cost of goods sold
        
  Sales $ 1,120,000  
  Cost percent   44 %
  


  Cost of goods sold $ 492,800  
  






 
  Salaries expense
      
  Cash paid $ 168,800   
  Less beginning payable   (40,000)  
  Plus ending payable   32,000   
  

  Salaries expense $ 160,800   
  




  
  Income tax expense
        
  Pre-tax income $ 331,520  
  Tax rate   30 %
  


  Income tax expense $ 99,456  
  






 
Budgeted Balance Sheet supporting calculations

Cash receipts in July from sales
 
     
  From May sales ($1,376,000 × 20%) $ 275,200  
  From June sales ($960,000 × 50%)   480,000  
  From July sales ($1,120,000 × 30%)   336,000  
 

  Total $ 1,091,200  
 




 
Cash disbursements in July for merchandise
     
  For June purchases ($344,000 × 40%) $ 137,600  
  For July purchases ($600,000 × 60%)   360,000  
 

  Total $ 497,600  
 






  Accounts receivable
      
  June sales (20% × $960,000) $ 192,000  
  July sales (70% × $1,120,000)   784,000  
  

  Total $ 976,000  
  





  Accumulated depreciation
      
  Beginning $ 224,000  
  Depreciation expense(July)   9,600  
  

  Ending $ 233,600  
  




 
  Accounts payable
        
  Purchases $ 600,000  
  Percent unpaid   40 %
    


  Payable $ 240,000  
  






 
  Retained earnings
      
  Beginning $ 857,600  
  Net income   232,064  
  

  Ending $ 1,089,664