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24 March, 16:19

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. Beginning cash balance on July 1: $69,000. Cash receipts from sales: 15% is collected in the month of sale, 50% in the next month, and 35% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,770,000; June (actual), $1,470,000; and July (budgeted), $1,470,000. Payments on merchandise purchases: 55% in the month of purchase and 45% in the month following purchase. Purchases amounts are: June (actual), $560,000; and July (budgeted), $650,000. Budgeted cash payments for salaries in July: $400,000. Budgeted depreciation expense for July: $13,000. Other cash expenses budgeted for July: $200,000. Accrued income taxes due in July: $90,000. Bank loan interest paid in July: $7,500.

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  1. 24 March, 16:33
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    Acco Co's Cash Budget for July

    Beginning cash balance on July 1, - $69,000

    add a) Expected Cash Receipts for July:

    May Sales = 35% x $1,770,000 - $619,500

    June Sales = 50% x $1,470,000 - $735,000

    July Sales = 15% x $1,470,000 - $220,500

    Totaling $1,575,000

    less b) Expected Cash Payments for July:

    June Purchases = 45% x $560,000 - $252,000

    July Purchases = 55% x $650,000 - $357,500

    Salaries = $400,000

    Other Cash Expenses = $200,000

    Accrued Income Taxes = $90,000

    Bank Loan Interest = $7,500

    Totalling - $1,307,000

    Expected Cash balance on July 31 = $337,000 $ (69,000 + 1,575,000 - 1,307,000)

    Explanation:

    The accrued income taxes that are due in July must be included in the cash payments since they are expected.

    Depreciation expense does not involve a cash payment. It does not appear in cash budgets.
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