Question

Hector Company reports the following:

	July			August			September
Sales	$	31,000		$	39,000		$	43,000
Purchases		17,670			22,230			31,000

Payments for purchases are made in the month after purchase. Selling expenses are 20% of sales, administrative expenses are 12% of sales, and both are paid in the month of sale. Rent expense of $3,300 is paid monthly. Depreciation expense is $1,500 per month.

Prepare a schedule of budgeted cash payments for August and September.

	HECTOR COMPANY Budgeted Cash Payments For August and September August September Payments for:

Answer 1

Solution :

Notes :

1. Payments for merchandise:

August = $ 17,670 ( Since payments for purchases made in July are made in the next month i.e., August )

September = $ 22,230 ( Since payments for purchases made in August are made in the next month i.e., September )

2.Selling expenses :

For August = Sales of August * 20 % = $ 39,000 * 20 % = $ 7,800

For September = Sales of September * 20 % = $ 43,000 * 20 % = $ 8,600

3.Administrative expenses :

For August = Sales of August * 12 % = $ 39,000 * 12 % = $ 4,680

For September = Sales of September * 12 % = $ 39,000 * 12 % = $ 5,160

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.