Reference no: EM132861653

Question 1 - Russell Company has the following projected account balances for June 30, 2011:

Accounts payable	$80,000	Sales	$1,600,000
Accounts receivable	200,000	Capital stock	800,000
Depreciation, factory	48,000	Retained earnings	?
Inventories (5/31 & 6/30)	360,000	Cash	112,000
Direct materials used	400,000	Equipment, net	480,000
Office salaries	160,000	Buildings, net	800,000
Insurance, factory	8,000	Utilities, factory	32,000
Plant wages	280,000	Selling expenses	120,000
Bonds payable	320,000	Maintenance, factory	56,000

Required -

a. Prepare a budgeted income statement for June 2011.

b. Prepare a budgeted balance sheet as of June 30, 2011.

Question 2 - Dalton Company has budgeted sales revenues as follows:

	June	July	August
Credit sales	$135,000	$145,000	$90,000
Cash sales	90,000	255,000	195,000
Total sales	$225,000	$400,000	$285,000

Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are:

June $300,000

July 250,000

August 105,000

Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash.

The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 8% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month.

Required - Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.