The balance sheet of Snapshot Inc a distributor of photograp

The balance sheet of Snapshot, Inc., a distributor of photographic supplies, as of May 31 is given below:

Sales are budgeted at $370,000 for June. Of these sales, $65,000 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are collected in the month the sales are made, and the remainder is collected the following month. All of the May 31 accounts receivable will be collected in June.

Purchases of inventory are expected to total $310,000 during June. These purchases will all be on account. Forty percent of all inventory purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the May 31 accounts payable to suppliers will be paid during June.

Selling and administrative expenses for June are budgeted at $52,000 , exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,100 for the month.

The note payable on the May 31 balance sheet will be paid during June. The company’s interest expense for June (on all borrowing) will be $700 , which will be paid in cash.

During June, the company will borrow $29,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year

Prepare schedule of expected cash collections from sales and a schedule of expected cash disbursements for inventory purchases.

Prepare a cash budget for June.

The balance sheet of Snapshot, Inc., a distributor of photographic supplies, as of May 31 is given below:

Solution

1(a) Schedule of Expected cash collection Cash sales in June $65,000 Collection on accounts receivables:     May 31 balance $83,000     June ((370000-65000)*1/2) $152,500 Total cash receipts $300,500 Schedule of Expected cash Disbursements May 31 accounts payable balance $111,000 June purchases (310000*40%) $124,000 Total cash Payments $235,000 1(b)Cash Budget For the month of June Cash balance, begning $7,000 Add receipts from customers $300,500 Total cash available $307,500 Less Disbursements: Purchase of inventory $235,000 Selling & Administrative expenses $52,000 Purchase of equipment $5,000 Total cash disbursements $292,000 Excess of receipts over disbursements $15,500 Financing: Borrowings - note $29,000 Repayments - note -$26,000 Interest -$700 Total financing $2,300 Cash balance, ending $17,800 Snapshot, Inc. Budgeted Income statement For the month of June Sales Revenue $370,000 Cost of goods sold (32000+310000-50000) $292,000 Selling & Administrative expenses $52,000 Depreciation expenses $3,100 Interest expenses $700 Total expenses $347,800 Net Income $22,200 Snapshot, Inc. Budgeted Balance sheet at the month end on 30 June Assets Cash $17,800 Accounts receivables $152,500 Inventory $50,000 Buildings & Equipments net of depreciation $611,900 (610000+5000-3100) Total assets $832,200 Liabilities & stockholder\'s equity Accounts payable $186,000 Note payable $29,000 Capital stock $530,000 Retained earnings (65000+22200) $87,200 Liabilities & equity $832,200