3 value: 3.50 points Following information relates to Acco Co a. Beginning cash
ID: 2465335 • Letter: 3
Question
3 value: 3.50 points Following information relates to Acco Co a. Beginning cash balance on July 1: $50,000. 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), $1,720,000; June (actual), $1,200,000; and July (budgeted), $1,400,000. C. Payments on merchandise purchases: 60% in the month of purchase and 40% in the month following purchase. Purchases amounts are: June (actual), $700,000; and July (budgeted), $750,000. d. Budgeted cash disbursements for salaries in July: $275,000. e. Budgeted depreciation expense for July: $36,000. f. Other cash expenses budgeted for July: $200,000. g. Accrued income taxes due in July: $80,000. h. Bank loan interest paid July 31: $6,600. Additional Information: a. Cost of goods sold is 55% of sales. b. Inventory at the end of June is $80,000 and at the end of July is $60,000. c. Salaries payable on June 30 are $50,000 and are expected to be $60,000 on July 31 d. The equipment account balance is $1,600,000 on July 31. On June 30, the accumulated depreciation on equipment is $280,000. e. The $6,600 cash payment of interest represents the 1% monthly expense on a bank loan of $660,000. f. Income taxes payable on July 31 are $30,720, 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 $600,000 on June 30; and Retained Earnings, with a balance of $964,000 on June 30.Explanation / Answer
ACCO Company Calculation of cash receipt from sales Credit sales from Total Sales May June July Accounts Receivable(July 31st) May $ 1,720,000.00 $ 516,000.00 $ 860,000.00 $ 344,000.00 $ - June $ 1,200,000.00 $ 360,000.00 $ 600,000.00 $ 240,000.00 July $ 1,400,000.00 $ 420,000.00 $ 980,000.00 Totals $ 4,320,000.00 $ 516,000.00 $ 1,220,000.00 $ 1,364,000.00 $ 1,220,000.00 ACCO Company Calculation of cash Payment of Merchandise Credit Purchases from Total Purchases June July Accounts Payable(July 31st) June $ 700,000.00 $ 420,000.00 $ 280,000.00 $ - July $ 750,000.00 $ 450,000.00 $ 300,000.00 Totals $ 1,450,000.00 $ 420,000.00 $ 730,000.00 $ 300,000.00 ACCO Company Cash Budget For the month of july 31st Beginning Cash Balance $ 50,000.00 Cash Receipts from sales $ 1,364,000.00 Total Cash available $ 1,414,000.00 Cash Disbursement: Payment for merchandise $ 730,000.00 Salaries $ 275,000.00 Other expenses $ 200,000.00 Accured taxes $ 80,000.00 Interest on bank loan $ 6,600.00 Total Cash disbursement $ 1,291,600.00 Ending cash balance $ 122,400.00 ACCO Company Budgted Income Statement For month ended July 31st Sales 1400000 Cost of goods sold 770000 Gross Profit 630000 Operating Expenses Salaries Expenses 285000 Depreciation Expenses 36000 Other cash expenses 200000 Bank loan interest expense 6600 Total operating expenses 527600 Income before taxes 102400 Income tax expense 30720 Net Income 71680 ACCO Company Budgted Balance Sheet As of July 31st Assets Cash $ 122,400.00 Inventory $ 60,000.00 Accounts Receivable $ 1,220,000.00 Fixed Assets $ 1,600,000.00 Total Assets $ 3,002,400.00 Liabilities Current Liabilites Accumulated depreciation $ 316,000.00 Salary Payable $ 60,000.00 Accounts Payable $ 300,000.00 Borrowings $ 600,000.00 Taxes $ 30,720.00 Stock holder's Equity Common stock $ 1,035,680.00 Retained Earning $ 660,000.00 Total Liabilities $ 3,002,400.00
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