Question

Use the following information to prepare the July cash budget for Acco Co. It should show expected cash receipts and cash payments for the month and the cash balance expected on July 31.

a. Beginning cash balance on July 1: $74,000.
b. Cash receipts from sales: 25% is collected in the month of sale, 50% in the next month, and 25% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are May (actual), $1,920,000; June (actual), $1,420,000; and July (budgeted), $1,550,000.
c. Payments on merchandise purchases: 80% in the month of purchase and 20% in the month following purchase. Purchases amounts are: June (actual), $460,000; and July (budgeted), $740,000.
d. Budgeted cash payments for salaries in July: $260,000. Budgeted depreciation expense for July: $10,000.
e. Other cash expenses budgeted for July: $280,000.
f. Accrued income taxes due in July: $50,000.
g. Bank loan interest paid in July: $7,000.

Answer 1

Answer:

Acco Co.

Acco Co. Cash Budget for the month of July

Beginning balance                 $74,000

Expected cash receipts       1,575,000

Cash in hand                      $1,651,500

Payments:

Purchases                            $684,000

Salaries                                  260,000

Other cash expenses           280,000

Accrued income taxes            50,000

Bank loan interest                     7,000

Expected cash payments $1,281,000

Expected cash balance     $370,500

Explanation:

a) Data and Calculations:

a. Beginning cash balance on July 1: $74,000.

b. Cash receipts from sales:  May (acetual)   June (actual)  July (budgeted)

Sales                                        $1,920,000      $1,420,000    $1,550,000

25% month of sale                                                                       387,500

50% in the next month                                                                 710,000

25% in the second month                                                           480,000

Total expected cash collections in July                                 $1,575,000

c. Payments on merchandise purchases:

                                               June (actual)    July (budgeted)

Purchases                                 $460,000        $740,000

80% in the month                                               592,000

20% in the following month                                 92,000

Total payment for purchases                          $684,000

d. Salaries in July: $260,000

e. Other cash expenses $280,000

f. Accrued income taxes $50,000

g. Bank loan interest $7,000