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.

 

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

Use the following information to prepare the July cash budget for Acco Co. It should show expected cash receipts and cash disbursements for the month and the cash balance expected on July 31.

Use the following information to prepare the July cash budget for Acco Co. It should show expected cash receipts and cash disbursements for the month and the cash balance expected on July 31.

 


Explanation:

Note: Depreciation expense is excluded since it is a non-cash expense.

 

Supporting calculations

 

Cash receipts in July from sales

From May sales ($1,750,000 × 15%)	$	262,500
From June sales ($1,480,000 × 50%)		740,000
From July sales ($1,540,000 × 35%)		539,000
Total	$	1,541,500

  

Cash disbursements in July for merchandise

For June purchases ($570,000 × 10%)	$	57,000
For July purchases ($450,000 × 90%)		405,000
Total	$	462,000