Question

Paul’s Pool Service provides pool cleaning, chemical application, and pool repairs for residential customers. Clients are billed weekly for services provided and usually pay 50 percent of their fees in the month the service is provided. In the month following service, Paul collects 40 percent of service fees. The final 10 percent is collected in the second month following service. Paul purchases his supplies on credit, and pays 50 percent in the month of purchase and the remaining 50 percent in the month following purchase. Of the supplies Paul purchases, 80 percent is used in the month of purchase, and the remainder is used in the month following purchase.

The following information is available for the months of June, July, and August, which are Paul’s busiest months:

• June 1 cash balance $14,900.
• June 1 supplies on hand $3,900.
• June 1 accounts receivable $8,200.
• June 1 accounts payable $3,800.
• Estimated sales for June, July, and August are $24,600, $36,900, and $39,000, respectively.
• Sales during May were $22,600, and sales during April were $16,400.
• Estimated purchases for June, July, and August are $9,200, $17,400, and $12,300, respectively.
• Purchases in May were $5,100.

Required:
1. Compute budgeted cash receipts and budgeted cash payments for each month.

	June July August Budgeted Cash Receipts Budgeted Cash Payments

2. Compute the balances necessary to prepare a budgeted balance sheet for August 31 for each of the following accounts:

	Balances for August 31 Budgeted Balance Sheet Cash June 1 Balance Add: Total Cash Receipts Less: Total Cash Payments August 31 Balance Supplies Inventory 20% of August Purchases Accounts Receivable 50% of August Sales 10% of July Sales Balance at August 31 Accounts Payable 50% of August Purchases

Answer 1

1.Budgeted Cash Receipt
	June	July	August
Sales	24,600	36,900	39000
Budgeted Cash Receipts
Receipt from customers billed in
April ( April sales * 5%) (16400*10%)	1,640.00
May ( June : 22600*40%), ( Jul: 22600*10%)	9,040.00	2,260.00
June ( in June : 50%, Jul: 40%, Aug : 10%)	12,300.00	9,840.00	2,460.00
July ( in July: 50%, Aug: 40%)		18,450.00	14,760.00
August ( in Aug: 50%)			19,500.00
Total Budgeted Cash Receipts for the month	22,980.00	30,550.00	36,720.00

2.Budgeted Cash Payment
	June	July	August
Purchase	9200	17400	12300
Payment made for purchases made in
May (5100*50%)	2,550.00
June ( in June , 50%) ( in Jul, 50%)	4,600.00	4,600.00
July ( in Jul 50%), ( in Aug:50%)		8,700.00	8,700.00
August ( in Aug: 50%)			6,150.00
Total Budgeted Cash Payments for the month	7,150.00	13,300.00	14,850.00

Balances for August 31 Budgeted Balance sheet
Particulars	$
Cash
June 1 Balance	14,900
Add:Total Cash Receipts	90,250
Less: Total Cash Payments	-35,300
August 31 Balance	69,850
Supplies Inventory
20% of August Purhase (12300*20%)	2,460
Accounts Recevable
60% of August Sales (39000*60%)	23,400
10% of July sales (36900*10%)	3,690
August 31 Balance	27,090
Accounts Payable
50% of August Purchases (12300*50%)	6,150

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