The Peoria Supply Company sells for $30 one product that it purchases for $20. B

Question

The Peoria Supply Company sells for $30 one product that it purchases for $20. Budgeted sales in total dollars for next year are $720,000. The sales information needed for preparing the July budget follows:

Account balances at July 1 include these:

The company pays for one-half of its purchases in the month of purchase and the remainder in the following month. End-of-month inventory must be 50 percent of the budgeted sales in units for the next month. A 2 percent cash discount on sales is allowed if payment is made during the month of sale. Experience indicates that 50 percent of the billings will be collected during the month of sale, 40 percent in the following month, 8 percent in the second following month, and 2 percent will be uncollectible. Total budgeted selling and administrative expenses (excluding bad debts) for the fiscal year are estimated at $180,000 , of which one-half is fixed expense (inclusive of a $18,000 annual depreciation charge). Fixed expenses are incurred evenly during the year. The other selling and administrative expenses vary with sales. Expenses are paid during the month incurred. (Round your answers to the nearest whole number.)

(a) Prepare a schedule of estimated cash collections for July.

(b) Prepare a schedule of estimated July cash payments for purchases. For this, perform your calculation using units rounding up to the nearest whole unit. Then convert to dollars for your answer.

(c) Prepare schedules of July selling and administrative expenses, separately identifying those requiring cash disbursements.

(d) Prepare a cash budget in summary form for July.

Month Sales Revenue May $ 30,000 June 42,000 July 51,000 August 54,000

Explanation / Answer

Workings

Ans 1 Peoria Supply Company
Schedule of Cash Collections
For the Month of July Current Month Sale 50% of sales less 2% cash discount 24,990.00 Previous Month sale 40% of sales 16,800.00 Prior 2 months Sale 8% of sales     2,400.00 Total Cash Collections 44,190.00 Ans 2 Peoria Supply Company
Schedule of Cash Payments for Purchases
For the Month of July Current Month Purchase 50% of current month purchase 17,000.00 Accounts Payable 12,000.00 Total Cash Payments 29,000.00 Ans 3 Peoria Supply Company
Schedule of Selling and Administrative Expenses and Cash Disbursements
For the Month of July Selling and Admin Expense Total Cash Fixed     7,500.00 Cash Payments     6,000.00 Variable 12.5% of sales , 90000/720000     6,375.00     6,375.00 Total Expenses and cash disbursements 13,875.00 12,375.00 Ans 4 Peoria Supply Company
Cash Budget
For the Month of July Cash Balance 20000 Cash Receipts 44,190.00 Total Cash 64,190.00 Cash disbursements: Merchandise 29,000.00 Selling and administrative 12,375.00 Total Disbursements 41,375.00 Excess Receipts(Disbursements) 22,815.00

Workings

Details Details Amount Desired Inventory 54000*20/30*1/2 18,000.00 Current Month sale 51000*20/30 34,000.00 Less Opening Inventory 18,000.00 Purchases 34,000.00

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