M&H Ltd. budgeted the following information for 2020: • Cost of goods sold is 50
ID: 2512761 • Letter: M
Question
M&H Ltd. budgeted the following information for 2020:
• Cost of goods sold is 50% of sales. Accounts payable is used only for inventory acquisitions.
• M&H purchases and pays for merchandise 50% in the month of acquisition and 50% in the following month.
• Selling and administrative expenses are budgeted at $30,000 for May and are expected to increase 2% per month. They are paid during the month of acquisition.
In addition, budgeted Depreciation is $5,000 per month.
• M&H pays $700 per month for its 5% note payable and interest.
• New equipment costing $12,000 will be purchased in June and an additional equipment purchase for $3,000 will be made in July. Depreciation on the new equipment will start in the month of purchase.
• Income taxes are $5,000 for July and are paid in the month incurred.
Requirements:
1. What is the amount of cash paid for July purchases?
2. What is the amount of cash paid for June purchases?
3. What is the amount of cash paid for July selling and admin costs?
4. What is the amount of cash paid in July for the note, including interest?
5. What is the amount of cash paid in July for equipment?
6. What is the amount of cash paid in July for income taxes?
May June July August Budgeted purchases $50,000 $60,000 $45,000 $55,000Explanation / Answer
Requirement 1 Cash Paid for July Purchases Budgeted purchases 45,000 Cash paid in the month of July 22,500 Cash paid in the month of August 22,500 Cash Paid for July Purchases 45,000 Requirement 2 Cash Paid for June Purchases Budgeted purchases 60,000 Cash paid in the month of June 30,000 Cash paid in the month of July 30,000 Cash Paid for June Purchases 60,000 Requirement 3 Cash Paid for July selling and admin costs Budgeted Selling and admin costs for May 30,000 Budgeted Selling and admin costs for June 30,600 (30000X102%) Budgeted Selling and admin costs for July 31,212 (30600X102%) Cash Paid for July selling and admin costs 31,212 Note: Cash paid during the month of acquisition Requirement 4 Cash paid in July for the note including interest 700 Requirement 5 Cash paid in July for equipment 3,000 Assuming that cash paid in the month of purchase Requirement 6 Cash paid in July for incomee taxes 5,000
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