Exercise 20-26A Merchandising: Preparing a budgeted income statement and balance sheet LO P4

Following information relates to Acco Co.

1. Beginning cash balance on July 1: $45,000.
2. 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), $1,548,000; June (actual), $1,080,000; and July (budgeted), $1,260,000.
3. Payments on merchandise purchases: 54% in the month of purchase and 46% in the month following purchase. Purchases amounts are: June (actual), $387,000; and July (budgeted), $600,000.
4. Budgeted cash payments for salaries in July: $189,900.
5. Budgeted depreciation expense for July: $10,800.
6. Other cash expenses budgeted for July: $135,000.
7. Accrued income taxes due in July: $80,000.
8. Bank loan interest paid in July: $5,940.

Additional Information:

1. Cost of goods sold is 40% of sales.
2. Inventory at the end of June is $72,000 and at the end of July is $168,000.
3. Salaries payable on June 30 are $45,000 and are expected to be $36,000 on July 31.
4. The equipment account balance is $1,440,000 on July 31. On June 30, the accumulated depreciation on equipment is $252,000.
5. The $5,940 cash payment of interest represents the 1% monthly expense on a bank loan of $594,000.
6. Income taxes payable on July 31 are $148,176, and the income tax rate is 35%.
7. The only other balance sheet accounts are Common Stock, with a balance of $587,620 on June 30; and Retained Earnings, with a balance of $964,800 on June 30.

Prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31.

Calculation of Cash Receipts From Sales
		------------------Collected in-------------------	July 31
	Total Sales	May	June	July	Accounts Rec.
Credit sales from:
May	$1,548,000		not attempted	not attempted
June	1,080,000	not attempted	not attempted	not attempted
July	1,260,000	not attempted	not attempted	not attempted
Totals	$3,888,000	$371,520	$0	$0	$0
Calculation of Cash Payments for Merchandise
		------------------Paid in-------------------	July 31
	Total Purchases	June	July	Accounts Pay.
Purchases from:
June	$387,000	not attempted	not attempted
July	600,000	not attempted	not attempted
Totals	$987,000	$0	$0	$0