A)- Russell Company has the following projected account balances for June 30, 2011:

Accounts payable$80,000Sales$1,600,000

Accounts receivable200,000Capital stock800,000

Depreciation, factory48,000Retained earnings?

Inventories (5/31 & 6/30) 360,000Cash112,000

Direct materials used400,000Equipment, net480,000

Office salaries160,000Buildings, net800,000

Insurance, factory8,000Utilities, factory32,000

Plant wages280,000Selling expenses120,000

Bonds payable320,000Maintenance, factory56,000

Required:

a.Prepare a budgeted income statement for June 2011

b.Prepare a budgeted balance sheet as of June 30, 2011.

B)-

Dalton Company has budgeted sales revenues as follows:

JuneJulyAugust

Credit sales$135,000$145,000$90,000

Cash sales90,000255,000195,000

Total sales$225,000$400,000$285,000

Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are:

June$300,000

July250,000

August105,000

Other cash disbursements budgeted:(a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash.

The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 8% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month.

Instructions

Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.

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