Less: taxes @ 40% (2,000) Net Income $ 3,000 7. The following are forecasts of sales and purchases for China Grove Company: Sales Purchases April $80,000 $30,000 May 90,000 40,000 June 85,000 30,000 All sales are on credit. Records show that 70 percent of the customers pay the month of the sale, 20 percent pay the month after the sale, and the remaining 10 percent pay the second month after the sale. Purchases are all paid the following month at a 2 percent discount. Cash disbursements for operating expenses in June were $5,000. Prepare a schedule of cash receipts and disbursements for June. Required: ANS: Schedules of Cash Receipts and Disbursements for June Cash Receipts: From current month sale (June) (.7 85,000)  $59,500 From 1 month prior sale (May) (.2 90,000)  18,000 From 2 month prior sale (April) (.1 80,000)  8,000 Total cash receipts $85,500 Cash Disbursements: May purchases @ 98% (less discount) (.98 40,000)  $39,200 Operating expenses 5,000 Total cash disbursements $44,200 Net increase in cash for June $41,300 8. Allen Builders in the building construction business. In Year 2, it is expected that 40 percent of a month's sales will be collected in cash, with the balance being collected the following month. Of the purchases, 50 percent are paid the following month, 30 percent are paid in two months, and the remaining 20 percent are paid during the month of purchase. The sales force receives $2,000 a month base pay plus a 2 percent commission. Labor expenses are expected to be $4,000 a month. Other operating expenses are expected to run about $2,000 a month, including $500 for depreciation. The ending cash balance for Year 1 was $4,500. Purchases Year 1-Actual November $80,000 $70,000 December 90,000 80,000 Year 2-Budgeted January 70,000 70,000 February 90,000 60,000 30,000 50,000 Required:
Less: taxes @ 40% (2,000) Net Income $ 3,000 7. The following are forecasts of sales and purchases for China Grove Company: Sales Purchases April $80,000 $30,000 May 90,000 40,000 June 85,000 30,000 All sales are on credit. Records show that 70 percent of the customers pay the month of the sale, 20 percent pay the month after the sale, and the remaining 10 percent pay the second month after the sale. Purchases are all paid the following month at a 2 percent discount. Cash disbursements for operating expenses in June were $5,000. Required: Prepare a schedule of cash receipts and disbursements for June. ANS: Schedules of Cash Receipts and Disbursements for June Cash Receipts: From current month sale (June) (.7  85,000) $59,500 From 1 month prior sale (May) (.2  90,000) 18,000 From 2 month prior sale (April) (.1  80,000) 8,000 Total cash receipts $85,500 Cash Disbursements: May purchases @ 98% (less discount) (.98  40,000) $39,200 Operating expenses 5,000 Total cash disbursements $44,200 Net increase in cash for June $41,300 8. Allen Builders in the building construction business. In Year 2, it is expected that 40 percent of a month's sales will be collected in cash, with the balance being collected the following month. Of the purchases, 50 percent are paid the following month, 30 percent are paid in two months, and the remaining 20 percent are paid during the month of purchase. The sales force receives $2,000 a month base pay plus a 2 percent commission. Labor expenses are expected to be $4,000 a month. Other operating expenses are expected to run about $2,000 a month, including $500 for depreciation. The ending cash balance for Year 1 was $4,500. Purchases Year 1-Actual November $80,000 $70,000 December 90,000 80,000 Year 2-Budgeted January 70,000 70,000 February 90,000 60,000 30,000 50,000 Required:
Ch08%20The%20Master%20Budget.docx