Question

Purchases and Cash Budgets
On July 1, MTC Wholesalers had a cash balance of $245,000 and accounts payable of $138,600. Actual sales for May and June, and budgeted sales for July, August, September, and October are:

Month	Actual Sales	Month	Budgeted Sales
May	$210,000	July	$ 126,000
June	224,000	August	112,000
		September	140,000
		October	168,000

All sales are on credit with 75 percent collected during the month of sale, 20 percent collected during the next month, and 5 percent collected during the second month following the month of sale. Cost of goods sold averages 70 percent of sales revenue. Ending inventory is one-half of the next month's predicted cost of sales. The other half of the merchandise is acquired during the month of sale. All purchases are paid for in the month after purchase. Operating costs are estimated at $39,200 each month and are paid during the month incurred.

Required
Prepare purchases and cash budgets for July, August, and September.

Do not use a negative sign with your answers.

MTC Wholesalers
Purchases Budget
For the Months of July, August, and September
		July	August	September
Inventory required, current sales		Answer	Answer	Answer
Desired ending inventory		Answer	Answer	Answer
Total inventory needs		Answer	Answer	Answer
Less beginning inventory		Answer	Answer	Answer
Purchases		Answer	Answer	Answer

Do not use a negative sign with your answers.

MTC Wholesalers
Cash Budget
For the Months of July, August, and September
		July	August	September
Cash balance, beginning		Answer	Answer	Answer
Cash receipts
Current month's sales		Answer	Answer	Answer
Previous month's sales		Answer	Answer	Answer
Sales two months prior		Answer	Answer	Answer
Total receipts		Answer	Answer	Answer
Cash available		Answer	Answer	Answer
Cash disbursements:
Purchases		Answer	Answer	Answer
Operating costs		Answer	Answer	Answer
Total disbursements		Answer	Answer	Answer
Cash balance, ending		Answer	Answer	Answer

Answer 1

MTC Wholesalers
Budget details
Details	May	June	July	Aug	Sept	Oct
Sales revenue	210,000	224,000	126,000	112,000	140,000	168,000
Cash collection for sale of May	157,500	42,000	10,500
Cash collection for sale of June		168,000	44,800	11,200
Cash collection for sale of July			94,500	25,200	6,300
Cash collection for sale of Aug				84,000.00	28,000.0	8,400.00
Cash collection for sale of Sep					105,000.00	28,000.0
Cash collection for sale of Oct						126,000.00
Total Cash collection	157,500	210,000	149,800	120,400	139,300	162,400
Inventory reqd for current sales	147,000.0	156,800.0	88,200.0	78,400.0	98,000.0	117,600.0
Ending Inventory Reqd	78,400.0	44,100.0	39,200.0	49,000.0	58,800.0	-
Less Opening Inventory		78,400.0	44,100.0	39,200.0	49,000.0	58,800.0
Net Purchases Required		122,500.0	83,300.0	88,200.0	107,800.0
Cash Paymnet for purchases			122,500.0	83,300.0	88,200.0	107,800.0

	MTC Wholesalers
	Cash Budget
Details	July	Aug	Sept
Opening Cash balance	245,000	233,100	231,000
Add Cash Receipt from sales	149,800	120,400	139,300
Total Cash Avavailable	394,800	353,500	370,300
Cash disbursements
Cash payment for purchase	122,500	83,300	88,200
Cash payment for operating cost	39,200	39,200	39,200
Total Cash Payment	161,700	122,500	127,400
Ending Cash Balance	233,100	231,000	242,900