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 70 percent of their fees in the month the service is provided. In the month following service, Paul collects 25 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, 70 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 $15,500.

June 1 supplies on hand $4,100.

June 1 accounts receivable $8,600.

June 1 accounts payable $4,000.

Estimated sales for June, July, and August are $25,800, $38,700, and $41,000, respectively.

Sales during May were $23,800, and sales during April were $17,200.

Estimated purchases for June, July, and August are $9,600, $18,200, and $12,900, 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

Schedule of Expected Cash Collection
	June	July	August	Total
Estimated Sales	$25,800	$38,700	$41,000	$105,500
Account Receivable, Beginning Balance	$8,600			$8,600
June Sales	$18,060	$6,450	$1,290	$25,800
July Sales		$27,090	$9,675	$36,765
August Sales			$28,700	$28,700
Total Cash Collection	$26,660	$33,540	$39,665	$99,865
Schedule of Expected Cash Payment
	June	July	August	Total
Estimated Purchase	9600	18200	12900	40700
Account payable, Beginning Balance	$4,000			4000
June purchase	$4,800	$4,800		9600
July Purchase		$9,100	$9,100	18200
August Purchase			$6,450	6450
Total Cash Collection	$8,800	$13,900	$15,550	$38,250
					Computation of Cash Balance on 31 Aug
Opening Cash Balance	$15,500
Cash Collection	$99,865
Cash Payment	-$38,250
Closing Cash Balance	$77,115
Computation of Account Receivable as on 31 Aug
5% of July Sales ($38700*5%)	$1,935
30 % of August Sales ($41000*30%)	$12,300
Closing Account Receivable Balance	$14,235
Computation of Account Payable as on 31 Aug
50% of August Purchase	$6,450
Closing Account Receivable Balance	$6,450