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 80 percent of their fees in the month the service is provided. In the month following service, Paul collects 15 percent of service fees. The final 5 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, 75 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 $15,400.
• June 1 supplies on hand $4,200.
• June 1 accounts receivable $8,700.
• June 1 accounts payable $4,100.
• Estimated sales for June, July, and August are $26,100, $39,200, and $41,900, respectively.
• Sales during May were $24,500, and sales during April were $17,500.
• Estimated purchases for June, July, and August are $9,600, $18,400, and $13,200, respectively.
• Purchases in May were $5,300.

Required:

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

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

Answer 1

Required 1

Particulars	June	July	Aug
Total Sale	26100	39200	41900
Cash receipts for:
April	875
May	3675	1225
June	20880	3915	1305
July		31360	5880
Aug			33520
Total receipts	25430	36500	40705

Particulars	June	July	Aug
Total Purchases	9600	18400	13200
Cash payments for:
May	2650	1225
June	4800	4800
July		9200	9200
Aug			6600
Total payments	7450	15225	15800

Required 2

Balances for Aug 31

• Cash

Opening as at June 1	15,400
Add receipts	102,635
Less Payments	38,475
Closing Balance as at Aug 31	79,560

• Accounts Payable

Opening as at June 1	4,100
Add purchases	41,200
Less Payments	38,475
Closing Balance as at Aug 31	6,825

• Accounts receivable

Opening as at June 1	8,700
Add Sales	107,200
Less Receipts	102,635
Closing Balance as at Aug 31	13,265

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