Question

Following information relates to Acco Co.

Beginning cash balance on July 1: $35,000.

Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month, and 20% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,204,000; June (actual), $840,000; and July (budgeted), $980,000.

Payments on merchandise purchases: 60% in the month of purchase and 40% in the month following purchase. Purchases amounts are: June (actual), $301,000; and July (budgeted), $600,000.

Budgeted cash payments for salaries in July: $147,700.

Budgeted depreciation expense for July: $8,400.

Other cash expenses budgeted for July: $105,000.

Accrued income taxes due in July: $80,000.

Bank loan interest paid in July: $4,620.

Additional Information:

Cost of goods sold is 44% of sales.

Inventory at the end of June is $56,000 and at the end of July is $224,800.

Salaries payable on June 30 are $35,000 and are expected to be $28,000 on July 31.

The equipment account balance is $1,120,000 on July 31. On June 30, the accumulated depreciation on equipment is $196,000.

The $4,620 cash payment of interest represents the 1% monthly expense on a bank loan of $462,000.

Income taxes payable on July 31 are $101,528, and the income tax rate is 35%.

The only other balance sheet accounts are: Common Stock, with a balance of $396,000 on June 30; and Retained Earnings, with a balance of $750,400 on June 30.

  
Prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31.

Calculate the budgeted cash receipts and cash payments.

Calculation of Cash Receipts From Sales ------------------Collected in------------------- July 31 Total Sales May June July Accounts Rec. Credit sales from: May $1,204,000 June 840,000 July 980,000 Totals $3,024,000 Calculation of Cash Payments for Merchandise ------------------Paid in------------------- July 31 Total Purchases June July Accounts Pay. Purchases from: June $301,000 July 600,000 Totals $901,000

Prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31.

	ACCO CO. Budgeted Income Statement For Month Ended July 31 Operating expenses: Total operating expenses ACCO CO. Budgeted Balance Sheet As of July 31 Assets Liabilities and Equity Liabilities Stockholders' Equity

Answer 1

Calculation of cash receipts from sales
	Collected in
	Total Sales	May	June	July	July 31 Accoounts receivable
Credit Sales From
May	1,204,000	361200	602000	240800
June	840,000		252000	420000	168,000
July	980,000			294000	686,000
Totals	3,024,000	361,200	854,000	954,800	854,000

Calculation of cash Payments for merchandise
		Paid In		July 31 Accounts Payable
Purchases From	Total Purchases	June	July
June	301,000	180600	120,400
July	600,000		360000	240,000
totals	901,000	180,600	480,400	240,000

ACCO CO.
Budgeted Income Statement
For Month Ended July 31
Sales		980,000
Cost of goods sold 980000*44%		431200
Gross Proit		548,800
Operating Expenses
Salaries Expense 147,700-35,000+28,000	140700
Depriciation Expense	8,400
Other Cash Expense	105,000
Bank Loan Interest Expense	4,620
Total Operating Expenses		258720
Income Before Taxes		290,080
Income Tax Expense		101,528
Net Income		188,552

ACCO CO.
Budgeted Balance Sheet
As of July 31
Assets
Cash	155280
Accounrs receivale	854,000
Inventory	224,800
		1,234,080
Total Current Assets
Equipment	1,120,000
Accumulated depriciation 196,000-8,400	-187600
Equipments Net		932,400
Total Assets		2,166,480
Liabilities and Equity
Liablities
Accounts Payable	240,000
Salaries Payable	28000
Income Tax payable	101,528