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, 85 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 $17,000.
• June 1 supplies on hand $4,600.
• June 1 accounts receivable $9,600.
• June 1 accounts payable $4,500.
• Estimated sales for June, July, and August are $28,800, $43,200, and $46,000, respectively.
• Sales during May were $26,800, and sales during April were $19,200.
• Estimated purchases for June, July, and August are $10,600, $20,200, and $14,400, respectively.
• Purchases in May were $5,800.

Required:
1. Compute budgeted cash receipts and budgeted cash payments for each month.

June July August

budgeted cash receipt .... .... ....

budgeted cash payments ... .... .....

2.Compute the balances necessary to prepare a budgeted balance sheet for August 31 for each of the following accounts:

balances for August 31 Budgeted Balance Sheet

Cash:

June 1 balance ....

add: Total cash receipts ....

less: total cash payments ....

August 31 Balance .....

supplies inventory:

15% of august purchases .....

accounts receivable:

30% of August sales ....

5% of July Sales ....

Balance at August 31 ...

Accounts payable:

50% of August Purchases ....

Answer 1

1.

CASH BUDGET
	June	July	August
Cash and cash equivalents, beginning of year	$17,000	$36,620	$60,000
Cash Receipt
April Sales	$960	$0	$0
May Sales	$6,700	$1,340	$0
June Sales	$20,160	$7,200	$1,440
July Sales	$0	$30,240	$10,800
August Sales	$0	$0	$32,200
Total Cash Receipt	$27,820	$38,780	$44,440
Cash Payments
May Purchase	$2,900	$0	$0
June Purchase	$5,300	$5,300	$0
July Purchase	$0	$10,100	$10,100
August Purchase	$0	$0	$7,200
Total Cash Payment	$8,200	$15,400	$17,300
Cash balance at the end of month	$36,620	$60,000	$87,140

2.

Balances for August 31 Budgeted Balance Sheet
Particulars	Amount	Amount
Assets
Cash Balance		$87,140.00
Inventory:
15% of august purchases	$2,160.00	$2,160.00
Accounts receivable:
30% of August sales	$13,800.00
5% of July Sales	$2,160.00	$15,960.00
		$105,260.00
Liabilities
Accounts payable:
50% of August Purchases	$7,200.00	$7,200.00
		$7,200.00