In: Accounting
Purchases and Cash Budgets
On July 1, ABC Wholesalers had a cash balance of $87,500 and
accounts payable of $49,500. Actual sales for May and June, and
budgeted sales for July, August, September, and October are:
Month |
Actual Sales |
May |
$75000 |
June |
80,000 |
Month |
Budgeted Sales |
July |
$45,000 |
August |
40,000 |
September |
50,000 |
October |
60,000 |
All sales are on credit with 75 percent collected during the month of sale, 20 percent collected during the next month, and 5 percent collected during the second month following the month of sale. Cost of goods sold averages 70 percent of sales revenue. Ending inventory is one-half of the next month's predicted cost of sales. The other half of the merchandise is acquired during the month of sale. All purchases are paid for in the month after purchase. Operating costs are estimated at $14,000 each month and are paid during the month incurred.
Required
Prepare purchases and cash budgets for July, August, and
September.
Do not use a negative sign with your answers.
ABC Wholesalers Purchases Budget For Month of July, August, and September |
|||
Months |
July |
August |
September |
Inventory required, current sales |
$answer |
$answer |
$answer |
Desired ending inventory |
Answer |
Answer |
Answer |
Total inventory needs |
Answer |
Answer |
Answer |
Less beginning inventory |
Answer |
Answer |
Answer |
Purchases |
$answer |
$answer |
$answer |
Do not use a negative sign with your answers.
ABC Wholesalers Cash Budget For Month of July, August, and September |
|||
Months |
July |
August |
September |
Cash balance, beginning |
$answer |
$answer |
$answer |
(Cash Receipts start here) Current month's sales |
Answer |
Answer |
Answer |
Previous month's sales |
Answer |
Answer |
Answer |
Sales two months prior Total receipts |
Answer Answer |
Answer Answer |
Answer Answer |
Cash available |
Answer |
Answer |
Answer |
(Cash disbursements start here) Purchases |
Answer |
Answer |
Answer |
Operating costs |
Answer |
Answer |
Answer |
Total disbursements |
Answer |
Answer |
Answer |
Cash balance, ending |
$answer |
$answer |
$answer |
Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. | ||||||
a. Purchase Budget: | ||||||
Months | July | August | September | October | ||
Inventory required, current sales | 70% of Sales Revenue | $ 31,500 | $ 28,000 | $ 35,000 | $ 42,000 | |
Desired ending inventory | Half of next Month | $ 14,000 | $ 17,500 | $ 21,000 | ||
Total inventory needs | $ 45,500 | $ 45,500 | $ 56,000 | |||
Less beginning inventory | $ 15,750 | $ 14,000 | $ 17,500 | |||
Purchases | $ 29,750 | $ 31,500 | $ 38,500 | |||
b. Cash Budget: | ||||||
Budgeted Sale | For Reference | $ 45,000 | $ 40,000 | $ 50,000 | ||
Months | July | August | September | |||
Cash balance, beginning | a | $ 87,500 | $ 77,500 | $ 76,750 | ||
Accounts Receivable-May | 75000*5% | $ 3,750 | ||||
Accounts Receivable-June | 80000*20% & 5% | $ 16,000 | $ 4,000 | |||
Current month's sales | $ 33,750 | $ 30,000 | $ 37,500 | |||
Previous month's sales | $ 9,000 | $ 8,000 | ||||
Sales two months prior | $ 2,250 | |||||
Total receipts | b | $ 53,500 | $ 43,000 | $ 47,750 | ||
Cash available | c=a+b | $ 141,000 | $ 120,500 | $ 124,500 | ||
Purchases | $ 49,500 | $ 29,750 | $ 31,500 | |||
Operating costs | $ 14,000 | $ 14,000 | $ 14,000 | |||
Total disbursements | d | $ 63,500 | $ 43,750 | $ 45,500 | ||
Cash balance, ending | c-d | $ 77,500 | $ 76,750 | $ 79,000 |