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, 75 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 $16,600.
• June 1 supplies on hand $4,600.
• June 1 accounts receivable $9,500.
• June 1 accounts payable $4,500.
• Estimated sales for June, July, and August are $28,500, $42,800, and $45,900, respectively.
• Sales during May were $26,900, and sales during April were $19,100.
• Estimated purchases for June, July, and August are $10,400, $20,000, and $14,400, respectively.
• Purchases in May were $5,700.

Required:

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

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

• equired 1
• Required 2

Compute budgeted cash receipts and budgeted cash payments for each month.

	June	July	August
Budgeted Cash Receipts
Budgeted Cash Payments

• Required 1
• Required 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
25% 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

Solution 1:

Computation of Budgeted cash receipts
Particulars	June	July	August
Collection for April Sales	$955.00
Collection for May Sales	$6,725.00	$1,345.00
Collection for June Sales	$19,950.00	$7,125.00	$1,425.00
Collection for July Sales		$29,960.00	$10,700.00
Collection for August Sales			$32,130.00
Budgeted cash receipts	$27,630.00	$38,430.00	$44,255.00
Computation of Budgeted cash Payments
Particulars	June	July	August
Accounts payable	$2,850.00
Payments for June Purchases	$5,200.00	$5,200.00
Payments for July Purchases		$10,000.00	$10,000.00
Payments for August Purchases			$7,200.00
Budgeted cash receipts	$8,050.00	$15,200.00	$17,200.00

Solution 2:

Balances for August 31
Budgeted Balance Sheet
Particulars	Amount
Cash:
June 1 Balance	$16,600.00
Add: Total cash receipts	$110,315.00
Less: Total cash payments	$40,450.00
August 31, balance	$86,465.00
Supplies Inventory
25% of August Purchase	$3,600.00
Accounts receivables:
30% of August Sales	$13,770.00
5% of July Sales	$2,140.00
Balance at August 31	$15,910.00
Accounts payable:
50% of August Purchase	$7,200.00