Purchases and Cash Budgets On July 1, MTC Wholesalers had a cash balance of $350

Question

Purchases and Cash Budgets
On July 1, MTC Wholesalers had a cash balance of $350,000 and accounts payable of $198,000. Actual sales for May and June, and budgeted sales for July, August, September, and October are:

Purchases and Cash Budgets On July 1, MTC Wholesalers had a cash balance of $350,000 and accounts payable of $198,000. Actual sales for May and June, and budgeted sales for July, August, September, and October are: Month Actual Sales Month May June Budgeted Sales $180,000 160,000 200,000 240,000 $300,000 July 320,000 August All sales are on credit with 75 percent collected during the month of sale, 20 percent collected during the next month, and 5 percent collected during the second month following the month of sale Cost of goods sold averages 70 percent of sales revenue. Ending inventory is one-half of the next month's predicted cost of sales. The other half of the merchandise is acquired during the month of sale. All purchases are paid for in the month after purchase. Operating costs are estimated at $56,000 each month and are paid during the month incurred. Required Prepare purchases and cash budgets for July, August, and September Do not use a negative sign with your answers. MTC Wholesalers Purchases Budget For the Months of July, August, and September July September Inventory required, current sales $ Desired ending inventory Total Inventory needs Less beginning inventory

Explanation / Answer

MTC Wholesales Purchases Budget For the months of July, August and September July August September Inventory required current sales           1,26,000              1,12,000              1,40,000 Add: Desired ending inventory               56,000                 70,000                 84,000 Total inventory needs           1,82,000              1,82,000              2,24,000 Less: Beginning Inventory               63,000                 56,000                 70,000 Purchases           1,19,000              1,26,000              1,54,000 Workings: July August September October Inventory required current sales $1,80,000 X 70% $1,60,000 X 70% $2,00,000 X 70% $2,40,000 X 70%           1,26,000              1,12,000              1,40,000 1,68,000 Desired ending inventory $1,12,000 X 50% $1,40,000 X 50% $1,68,000 X 50%               56,000                 70,000                 84,000 Beginning Inventory 1,26,000 X 50% Ending inventory of previous month MTC Wholesales Cash Budget For the months of July, August and September July August September Cash balance, beginning $       3,50,000 $         3,10,000 $         3,07,000 cash receipts Current months sale $       1,35,000 $         1,20,000 $         1,50,000 Previous month sales $           64,000 $             36,000 $             32,000 sales two month prior $           15,000 $             16,000 $               9,000 Total receipts $       2,14,000 $         1,72,000 $         1,91,000 Cash available $       5,64,000 $         4,82,000 $         4,98,000 Cash disbursements: Purchases $       1,98,000 $         1,19,000 $         1,26,000 Operating costs $           56,000 $             56,000 $             56,000 Total disbursements $       2,54,000 $         1,75,000 $         1,82,000 Cash balance, ending $       3,10,000 $         3,07,000 $         3,16,000 Workings: May Sales = 5% in July June Sales = 20% in July and 5% in August July Sales = 75% in July, 20% in August and 5% in September August Sales = 75% in August and 20% in September September Sales = 75% in September

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