Question
  1. Beginning cash balance on July 1: $30,000.
  2. 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), $1,032,000; June (actual), $720,000; and July (budgeted), $840,000.
  3. Payments on merchandise purchases: 60% in the month of purchase and 40% in the month following purchase. Purchases amounts are: June (actual), $258,000; and July (budgeted), $600,000.
  4. Budgeted cash payments for salaries in July: $126,600.
  5. Budgeted depreciation expense for July: $7,200.
  6. Other cash expenses budgeted for July: $90,000.
  7. Accrued income taxes due in July: $80,000.
  8. Bank loan interest paid in July: $3,960.

Additional Information:

  1. Cost of goods sold is 44% of sales.
  2. Inventory at the end of June is $48,000 and at the end of July is $278,400.
  3. Salaries payable on June 30 are $30,000 and are expected to be $24,000 on July 31.
  4. The equipment account balance is $960,000 on July 31. On June 30, the accumulated depreciation on equipment is $168,000.
  5. The $3,960 cash payment of interest represents the 1% monthly expense on a bank loan of $396,000.
  6. Income taxes payable on July 31 are $99,456, and the income tax rate is 40%.
  7. The only other balance sheet accounts are: Common Stock, with a balance of $328,000 on June 30; and Retained Earnings, with a balance of $643,200 on June 30.

  
Prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31.

Calculation of Cash Receipts From Sales Collected in-- Total Sales May June July 31 Accounts Rec. July Credit sales from: May

ACCO CO. Budgeted Income Statement For Month Ended July 31 Operating expenses: Total operating expenses 0 $

Budgeted Balance Sheet As of July 31 Assets 0 Liabilities and Equity LiabilitiesLiabilities and Equity Liabilities Stockholders Equity

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Answer #1
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ACCO
Collection Budget Total Sales May June July Note
Credit sales from
May    1,032,000.00       309,600.00 516,000.00 206,400.00
June       720,000.00                        -   216,000.00 360,000.00
July       840,000.00                        -                      -   252,000.00
Total Scheduled Collections 2,592,000.00       309,600.00 732,000.00 818,400.00 A
Accounts Receivable Amount $ Note
20% of sales of June       144,000.00
70% of sales of July       588,000.00
Accounts Receivable       732,000.00 B
Answer 3- Cash disbursement for materials Total Purchases June July Note
Material Purchase Budget
June       258,000.00       154,800.00 103,200.00
July       600,000.00                        -   360,000.00
Cash disbursement for materials       858,000.00       154,800.00 463,200.00 C
Accounts Payable Amount $ Note
40% of purchases of July       240,000.00
Accounts Payable       240,000.00 D
Cash budget July Note
Beginning Cash Balance         30,000.00
Plus: Collections       818,400.00 See A
Cash Available       848,400.00
Disbursements
Material Payment       463,200.00 See C
Salaries       126,600.00
Other cash expenses         90,000.00
Income taxes         80,000.00
Bank Loan interest            3,960.00
Total cash payments       763,760.00
Ending cash balance         84,640.00 L
Salaries expense July
Salaries payable- July 31         24,000.00
Add: Payment for salaries in July       126,600.00
Less: Salaries payable- June 30         30,000.00
Salaries expense       120,600.00 D
Income Statement July
Sales Revenue       840,000.00 E
Less: Cost of goods sold       369,600.00 F=E*44%
Gross Profit       470,400.00
Less: Operating expenses
Salaries       120,600.00
Depreciation expense            7,200.00
Other expenses         90,000.00
Total Operating expenses       217,800.00
Earnings before interest and taxes       252,600.00
Less: Interest expense            3,960.00
Earnings before taxes       248,640.00 G
Less: Income tax         99,456.00 H=G*40%
Earnings after taxes       149,184.00 I
Accumulated depreciation as on 31st July Amount $
Accumulated depreciation as on 30th June       168,000.00
Add: Depreciation for July            7,200.00
Accumulated depreciation as on 31st July       175,200.00 J
Statement of Retained Earnings Amount $
Balance as on 30th June       643,200.00
Add: Net Income for July       149,184.00 See I
Balance as on 31st July       792,384.00 K
Balance Sheet as at December 31
Assets Amount $ Amount $ Remarks
Cash         84,640.00 See Note L
Accounts Receivable       732,000.00 See Note B
Merchandise Inventory       278,400.00 This is given in the question.
Total Current Assets 1,095,040.00
Property, plant & equipment, net
Equipment         960,000.00
Less: Accumulated depreciation       175,200.00 See Note J
Property, plant & equipment, net       784,800.00
Total Assets 1,879,840.00
Answer #1
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ACCO
Collection Budget Total Sales May June July Note
Credit sales from
May    1,032,000.00       309,600.00 516,000.00 206,400.00
June       720,000.00                        -   216,000.00 360,000.00
July       840,000.00                        -                      -   252,000.00
Total Scheduled Collections 2,592,000.00       309,600.00 732,000.00 818,400.00 A
Accounts Receivable Amount $ Note
20% of sales of June       144,000.00
70% of sales of July       588,000.00
Accounts Receivable       732,000.00 B
Answer 3- Cash disbursement for materials Total Purchases June July Note
Material Purchase Budget
June       258,000.00       154,800.00 103,200.00
July       600,000.00                        -   360,000.00
Cash disbursement for materials       858,000.00       154,800.00 463,200.00 C
Accounts Payable Amount $ Note
40% of purchases of July       240,000.00
Accounts Payable       240,000.00 D
Cash budget July Note
Beginning Cash Balance         30,000.00
Plus: Collections       818,400.00 See A
Cash Available       848,400.00
Disbursements
Material Payment       463,200.00 See C
Salaries       126,600.00
Other cash expenses         90,000.00
Income taxes         80,000.00
Bank Loan interest            3,960.00
Total cash payments       763,760.00
Ending cash balance         84,640.00 L
Salaries expense July
Salaries payable- July 31         24,000.00
Add: Payment for salaries in July       126,600.00
Less: Salaries payable- June 30         30,000.00
Salaries expense       120,600.00 D
Income Statement July
Sales Revenue       840,000.00 E
Less: Cost of goods sold       369,600.00 F=E*44%
Gross Profit       470,400.00
Less: Operating expenses
Salaries       120,600.00
Depreciation expense            7,200.00
Other expenses         90,000.00
Total Operating expenses       217,800.00
Earnings before interest and taxes       252,600.00
Less: Interest expense            3,960.00
Earnings before taxes       248,640.00 G
Less: Income tax         99,456.00 H=G*40%
Earnings after taxes       149,184.00 I
Accumulated depreciation as on 31st July Amount $
Accumulated depreciation as on 30th June       168,000.00
Add: Depreciation for July            7,200.00
Accumulated depreciation as on 31st July       175,200.00 J
Statement of Retained Earnings Amount $
Balance as on 30th June       643,200.00
Add: Net Income for July       149,184.00 See I
Balance as on 31st July       792,384.00 K
Balance Sheet as at December 31
Assets Amount $ Amount $ Remarks
Cash         84,640.00 See Note L
Accounts Receivable       732,000.00 See Note B
Merchandise Inventory       278,400.00 This is given in the question.
Total Current Assets 1,095,040.00
Property, plant & equipment, net
Equipment         960,000.00
Less: Accumulated depreciation       175,200.00 See Note J
Property, plant & equipment, net       784,800.00
Total Assets 1,879,840.00
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