E9-28 Purchases & Cash Budgets On July 1, MTC Wholesalers had a cash balance of
ID: 2790834 • Letter: E
Question
E9-28 Purchases & Cash Budgets
On July 1, MTC Wholesalers had a cash balance of $175,000 and accounts payable of $99,000. Actual sales for May and June, and budgeted sales for
July, August, September, and October are:
Actual Sales
May $150,000
June 160,000
Budgeted Sales
July 90,000
August 80,000
September 100,000
October 120,000
All Sales on credit with 75% collected during the month of sale.
20% collected during the next month
5% collected during the second month following the sale.
COGS average 70% of sales revenue
Ending inventory is one hlaf of the next months predicted cost of sales
The other half of the merchadise is acquired during the month of sale. All purchases are paid for in the month after purchase.
Operating costs are estimated at $28,000 each monthand are paid during the month incurred.
Prepare purchases and cash budgets for July, August, and September
Explanation / Answer
Description May June July August September October Sale-Quantity 280 260 310 410 385 435 Sale revenue 150,000 160,000 90,000 80,000 100,000 120,000 Cash Sale - - - - - - Credit Sale 150,000 160,000 90,000 80,000 100,000 120,000 Credit sale collection- same month-75% 112,500 120,000 67,500 60,000 75,000 90,000 Credit sale collection- next month-20% 30,000 32,000 18,000 16,000 20,000 Credit sale collection- next 2nd month-5% 5,625 6,000 3,375 3,000 Monthly sale collection 105,125 84,000 94,375 113,000 Cost of Goods Sold-70% of sale revenue 105,000 112,000 63,000 56,000 70,000 84,000 Closing stock-50% of next moth COGS 56,000 31,500 28,000 35,000 42,000 - Less opening stock-Closing stock of previous month (56,000) (31,500) (28,000) (35,000) (42,000) Purchase: (COGS+Closing stock - Opening stock) 87,500 59,500 63,000 77,000 42,000 Purchase payments-next month 87,500 59,500 63,000 Operating cost 28,000 28,000 28,000 Cash Budget Opening cash 175,000 164,625 161,125 Budgeted Receipts 105,125 84,000 94,375 Budgeted Cash payments (115,500) (87,500) (91,000) Closing cash balance 164,625 161,125 164,500
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