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. 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.

Answer 1

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)

Step-by-step 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.