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Purchases and Cash Budgets On July 1, ABC Wholesalers had a cash balance of $87,500 and...

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

Solutions

Expert Solution

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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

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