11 May Walker Company prepares monthly budgets. The current budget plans for a September ending inventory of 38,000 units. C
| Walker Company prepares monthly budgets. The current budget plans for a September ending inventory of 38,000 units. Company policy is to end each month with merchandise inventory equal to a specified percent of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow. |
| Sales (Units) | Purchases (Units) | |
| July | 210,000 | 232,000 |
| August | 320,000 | 318,000 |
| September | 310,000 | 286,000 |
| 2. Use the following information to prepare the July cash budget for Acco 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: $77,000. |
| b. | Cash receipts from sales: 35% is collected in the month of sale, 50% in the next month, and 15% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,800,000; June (actual), $1,400,000; 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), $440,000; and July (budgeted), $760,000. |
| d. | Budgeted cash disbursements for salaries in July: $200,000. |
| e. | Budgeted depreciation expense for July: $14,000. |
| f. | Other cash expenses budgeted for July: $190,000. |
| g. | Accrued income taxes due in July: $100,000. |
| h. Bank loan interest due in July: $6,000.
· Calculation of cash receipts from sales · Calculation of cash payments for merchandise · Cash budget |
| 3. Following information relates to Acco Co. |
| a. | Beginning cash balance on July 1: $35,000. |
| b. | Cash receipts from sales: 27% is collected in the month of sale, 50% in the next month, and 23% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,204,000; June (actual), $840,000; and July (budgeted), $980,000. |
| c. | Payments on merchandise purchases: 54% in the month of purchase and 46% in the month following purchase. Purchases amounts are: June (actual), $301,000; and July (budgeted), $600,000. |
| d. | Budgeted cash disbursements for salaries in July: $147,700. |
| e. | Budgeted depreciation expense for July: $8,400. |
| f. | Other cash expenses budgeted for July: $105,000. |
| g. | Accrued income taxes due in July: $80,000 (related to June). |
| h. | Bank loan interest paid July 31: $4,620. |
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