Question

Use the following information to prepare the July cash budget for Anker Co. It should show expected cash receipts and cash disbursements for the month and the cash balance expected on July 31.

a. Beginning cash balance on July 1: $63,000.

b. Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month, and 20% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,700,000; June (actual), $1,200,000; and July (budgeted), $1,400,000.

c. Payments on merchandise purchases: 90% in the month of purchase and 10% in the month following purchase. Purchases amounts are: June (actual), $620,000; and July (budgeted), $790,000.

d. Budgeted cash disbursements for salaries in July: $220,000.

e. Budgeted depreciation expense for July: $11,000.

f. Other cash expenses budgeted for July: $230,000.

g. Accrued income taxes due in July: $50,000.

h. Bank loan interest due in July: $7,000

Required:

Prepare cash budget for month of July?

Answer 1

ANKER COMPANY

CASH BUDGET

PARTICULARS

MAY

JUNE

JULY

BEGINNING CASH BALANCE AS ON JULY 1

$63,000

ADD: CASH RECEIPTS

$1,360,000

CASH AVAILABLE

$1,423,000

LESS: CASH PAYMENTS FOR PURCHASES

($711,000)

LESS: CASH PAYMENTS FOR SALARIES

($220,000)

LESS:OTHER CASH EXPENSES

($230,000)

LESS: INTEREST PAYMENTS

($7,000)

LESS: DEPRECIATION EXPENSE

($11,000)

LESS: INCOME TAX EXPENSE

($50,000)

BUDGETED ENDING CASH BALANCE AS ON JULY 31

$244,000

WORKING NOTES

1)

ANKER COMPANY

SCHEDULE OF CASH RECEIPTS

MAY

JUNE

JULY

BUDGETED SALES

CASH RECEIPTS ,CURRENT MONTH(CURRENT MONTH SALES *30%)

$420,000

$1400000*30%

CASH RECEIPTS FROM PREVIOUS MONTH (PREVIOUS MONTH SALES *50%

$360,000

$600,000

$1200000*30%

$1200000*50%

CASH RECEIPTS FROM PREVIOUS MONTH (PREVIOUS MONTH SALES * 20%)

$510,000

$850,000

$340,000

$1700000*30%

$1700000*50%

$1700000*20%

TOTAL CASH COLLECTIONS FROM SALES

$510,000

$1,210,000

$1,360,000

2)

ANKER COMPANY

SCHEDULE OF CASH PAYMENTS

MAY

JUNE

JULY

BUDGETED MATERIAL PURCHASES

CASH PAYMENTS, CURRENT QUARTER (90%)

$558,000

$62,000

$620000*90%

$620000*10%

CASH PAYMENTS, FROM PREVIOUS QUARTER (10%)

$711,000

$790000*90%

TOTAL CASH PAYMENTS FOR MERCHANDISE PURCHASES

$558,000

$773,000