Question

Use the following information to prepare the July cash budget for Pinkie Pie Company for July 31, 2021.

a.) Beginning cash balance on July 1: $55,000.
b.) Cash receipts from sales: 10% is collected in the month of sale, 50% in the next month, and 40% in the second month after sale. Sales amounts are: May (actual), $1,700,000; June (actual), $1,000,000; and July (budgeted), $1,500,000.
c.) Payments to suppliers for merchandise purchases: 85% in the month of purchase and 15% in the month following purchase. Purchases amounts are: June (actual), $590,000; and July (budgeted), $770,000.
d.) Budgeted cash disbursements for salaries in July: $297,000.
e.) Budgeted depreciation expense for July: $10,000.
f.) Other cash expenses budgeted for July: $190,000.
g.) Cash dividends to be paid in July: $70,000.

Answer 1

Pinkie Pie Company

Cash Budget for the month of July:

Beginning balance $55,000

Expected cash receipts 1,330,000

Cash in hand $1,385,000

Payments:

Purchases $743,000

Salaries 297,000

Other cash expenses 190,000

Cash Dividends 70,000

Expected cash payments $1,300,000

Expected cash balance $85,000

Step-by-step explanation:

a) Data and Calculations:

a. Beginning cash balance on July 1: $55,000.

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

Sales $1,700,000 $1,000,000 $1,500,000

10% month of sale 150,000

50% in the next month 500,000

40% in the second month 680,000

Total expected cash collections in July $1,330,000

c. Payments on merchandise purchases:

June (actual) July (budgeted)

Purchases $590,000 $770,000

85% in the month 654,500

15% in the following month 88,500

Total payment for purchases $743,000

d. Salaries in July: $297,000

f. Other cash expenses $190,000

g. Cash Dividends $70,000