Question

M&H Ltd. budgeted the following information for 2020:

	May	June	July	August
Budgeted purchases	$50,000	$60,000	$45,000	$55,000

•        Cost of goods sold is 50% of sales. Accounts payable is used only for inventory acquisitions.
•        M&H purchases and pays for merchandise 50% in the month of acquisition and 50% in the following month.
•        Selling and administrative expenses are budgeted at $30,000 for May and are expected to increase 2% per month. They are paid during the month of acquisition.
In addition, budgeted Depreciation is $5,000 per month.
•        M&H pays $700 per month for its 5% note payable and interest.
•        New equipment costing $12,000 will be purchased in June and an additional equipment purchase for $3,000 will be made in July. Depreciation on the new equipment will start in the month of purchase.
•        Income taxes are $5,000 for July and are paid in the month incurred.

Requirements:

1. What is the amount of cash paid for July purchases?

2. What is the amount of cash paid for June purchases?

3. What is the amount of cash paid for July selling and admin costs?

4.  What is the amount of cash paid in July for the note, including interest?

5. What is the amount of cash paid in July for equipment?

6. What is the amount of cash paid in July for income taxes?

Answer 1

Requirement 1
Cash Paid for July Purchases
Budgeted purchases	45,000
Cash paid in the month of July	22,500
Cash paid in the month of August	22,500
Cash Paid for July Purchases	45,000
Requirement 2
Cash Paid for June Purchases
Budgeted purchases	60,000
Cash paid in the month of June	30,000
Cash paid in the month of July	30,000
Cash Paid for June Purchases	60,000
Requirement 3
Cash Paid for July selling and admin costs
Budgeted Selling and admin costs for May	30,000
Budgeted Selling and admin costs for June	30,600	(30000X102%)
Budgeted Selling and admin costs for July	31,212	(30600X102%)
Cash Paid for July selling and admin costs	31,212
Note: Cash paid during the month of acquisition
Requirement 4
Cash paid in July for the note including interest	700
Requirement 5
Cash paid in July for equipment	3,000
Assuming that cash paid in the month of purchase
Requirement 6
Cash paid in July for incomee taxes	5,000