Johnson company budgeted the following information for 2006 :budgeted purchases May,104,000 June 110,000 July 102,000 August 100,000


cost of goods sold is 40% of sales. Accounts payable is used only for inventory acquisitions
Johnson purchases and pays for merchandise 60% in month of aquistion and 40% in the following month.

selling and administrative expenses are budgeted at 40,000 dollars for may and are expected to increase 5% per month. they are paid during the month of acquisition.in addition, budgeted deprecation is 10,000 per month.
Johnson pays 4,500 per,month for its 6%note payable in interest.
income taxes are 38400 for July and are paid in the month incurred

How much are the budgeted cash disbursements for July?

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How do I start ? This problem

You need to just take it literally and follow each step. Don't attempt to look at the whole problem. Look at each step and just follow it exactly.

Make yourself four columns for the 4 months and stick those initial figures in there. And then fix the problem because you can't have COGS as 40% of sales when you have no sales. But if you decide that first set of numbers is sales instead of purchases, then quite literally just take 40% of it and write that down as COGS under the same month. (Don't forget to label each row.)

Then keep following... 60% of that is going to get paid in the same month, so figure 60% of COGS and that gets paid in the same month. The balance of it gets paid in the next month, so put the balance in the next month.

While you're doing this, keep track of what is just numbers you need to use and which are actual cash disbursements. The COGS isn't cash disbursements for instance. But the payment of COGS is. (I always put little x's by rows which are the actual cash part. I can clean it up later.)

Then just keep going, literally following every line they give. Again, take one thing at a time and deal with that one thing and don't look at other stuff.

These types of problems are usually made more difficult by trying to take in too much at once, and letting it look overwhelming, instead of just taking things one thing at a time and literally following exactly what it says.

Thank you