Use the following information to prepare the July cash budget for Acco Co. It sh
ID: 2484009 • Letter: U
Question
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.
a. Beginning cash balance on July 1: $69,000.
b. Cash receipts from sales: 20% is collected in the month of sale, 50% in the next month, and 30% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,840,000; June (actual), $1,400,000; and July (budgeted), $1,450,000.
c. Payments on merchandise purchases: 60% in the month of purchase and 40% in the month following purchase. Purchases amounts are: June (actual), $520,000; and July (budgeted), $710,000.
d. Budgeted cash disbursements for salaries in July: $300,000.
e. Budgeted depreciation expense for July: $15,000.
f. Other cash expenses budgeted for July: $170,000.
g. Accrued income taxes due in July: $70,000.
h. Bank loan interest due in July: $5,500.
Explanation / Answer
1. Calculation of Cash receipts from Sales Credit Sales From Collected in July 31 Total Sales May June July Account Rec. May 1,840,000 368,000 920,000 552,000 - June 1,400,000 280,000 700,000 420,000 July 1,450,000 290,000 1,160,000 Total 4,690,000 368,000 1,200,000 1,542,000 1,580,000 2 Calculation of Cash Payments for Mechandise Paid in July 31 Total Purchase June July Account Payable June 520,000 312,000 208,000 - July 710,000 426,000 284,000 1,230,000 312,000 634,000 284,000 3. Cash budget for the month of July $ Opening Cash 69000 Add:- Collection from Account Receivable 1,542,000 1,611,000 Less:- Cash Disbursement Cash payment for Mechandise 634,000 Salaries 300,000 Other Exp 170,000 Income Tax 70,000 Bank Interest 5,500 1,179,500 Closing Balance 431,500
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