Question

Use the following information to prepare the July cash budget for Acco Co. It should show expected cash receipts and cash payments for the month and the cash balance expected on July 31. Beginning cash balance on July 1: $66,000. Cash receipts from sales: 25% is collected in the month of sale, 50% in the next month, and 25% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are May (actual), $1,950,000; June (actual), $1,310,000; and July (budgeted), $1,590,000. Payments on merchandise purchases: 90% in the month of purchase and 10% in the month following purchase. Purchases amounts are: June (actual), $420,000; and July (budgeted), $700,000. Budgeted cash payments for salaries in July: $300,000. Budgeted depreciation expense for July: $14,000. Other cash expenses budgeted for July: $120,000. Accrued income taxes due in July: $70,000. Bank loan interest paid in July: $9,500.

Answer 1

Solution:

Calculation of Cash Receipts from sales in the month of July
Particulars	Amount ($)
For Sales in May (25%)	487,500
For Sales in June (50%)	655,000
For Sales in July (25%)	397,500
Total Cash Receipts from Sales in the month of July	1,540,000

Calculation of Cash Payments for purchases in the month of July
Particulars	Amount ($)
For Purchases in June (10%)	42,000
For Purchases in July (90%)	630,000
Total Cash Payments for Purchases in the month of July	672,000

Cash Budget for the month of July
Particulars	Amount ($)	Amount ($)
Beginning Cash Balance	66,000
Cash Receipts from Sales	1,540,000
Total Cash available		1,606,000
Cash Payments:
For Purchases	672,000
Salaries	300,000
Other Cash expenses	120,000
Accrued Income taxes	70,000
Bank Loan Interest	9,500
Total Cash Payments		1,171,500
Ending Cash Balance		434,500