Paul’s Pool Service provides pool cleaning, chemical application, and pool repai
ID: 2558564 • Letter: P
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 40 percent of their fees in the month the service is provided. In the month following service, Paul collects 50 percent of service fees. The final 10 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, 80 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 $16,300. June 1 supplies on hand $4,500. June 1 accounts receivable $9,300. June 1 accounts payable $4,400. Estimated sales for June, July, and August are $27,900, $41,900, and $44,900, respectively. Sales during May were $26,300, and sales during April were $18,700. Estimated purchases for June, July, and August are $10,200, $19,600, and $14,100, respectively. Purchases in May were $5,600. 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:
Paul's Pool Service provides pool cdeaning, chermical application, and pool repairs for residential customers. Clients are billed weekly for services provided and usually pay 40 percent of their fees in the month the service is provided. In the month following service, Paul collects 50 percent of service fees. The final 10 percent is collected in the seoond 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, 80 percent is used in the month of purchase, and the remainder is used in the month following purchase. The tollowing information is available for the manths of June, July, and August, which are Paul's busiest months: June 1 cash balance $16,300 June 1 supplies on hand $4,500. June 1 accounts recelvable S9,300 June 1 accounts payable $4,400 Estimated sales for June, July, and August are $27,900, $41,900, and $44,900, respectively. Sales during May were $26,300, and sales during April were $18,700, Estimated purchases for June, July, and August are $10,200, $19,600, and $14,100, respectively. Purchases in May were $5,600 Required: 1. Compute budgeted cash receipts and budgeted cash payments for each montn. June August Budgeted Cash Receipts Budgeted Cash PaymentsExplanation / Answer
Solution:
Budgeted Cash Receipts
June
July
August
April Sales
$1,870
(18700*10%)
May Sales
$13,150
(26300*50%)
2630
(26300*10%)
June Sales
$11,160
(27900*40%)
$13,950
(27900*50%)
$2,790
(27900*10%)
July Sales
$16,760
(41900*40%)
$20,950
(41900*50%)
August Sales
$17,960
(44900*40%)
Total Budgeted Cash Receipts
$26,180
$33,340
$41,700
Total Cash Receipts for 3 months = $101,220
Budgeted Cash Payments
Budgeted Cash Payments
June
July
August
May Purchases
$2,800
June Purchases
$5,100
$5,100
July Purchases
$9,800
$9,800
August Purchases
$7,050
Total Budgeted Cash Payments
$7,900
$14,900
$16,850
Total Cash Payments for 3 months = $39,650
Part 2
Balances for August 31 Budgeted Balance Sheet
Cash
June 1 balance
$16,300
Add: Total Cash Receipts
$101,220
Less: Total Cash Payments
$39,650
August 31 Balance
$77,870
Supplies Inventory
20% of August Purchases
$2,820
Accounts Receivable
60% of August Sales
$26,940
10% of July Sales
$4,190
Balance at August 31
$31,130
Accounts Payable
50% of August Purchase
$7,050
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Budgeted Cash Receipts
June
July
August
April Sales
$1,870
(18700*10%)
May Sales
$13,150
(26300*50%)
2630
(26300*10%)
June Sales
$11,160
(27900*40%)
$13,950
(27900*50%)
$2,790
(27900*10%)
July Sales
$16,760
(41900*40%)
$20,950
(41900*50%)
August Sales
$17,960
(44900*40%)
Total Budgeted Cash Receipts
$26,180
$33,340
$41,700
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