Question

Big City Manufacturing (BCM) is preparing its cash budget and expects to have sales of $450,000 in January, $375,000 in February, and $555,000 in March. If 20% of the sales are for cash, 45% are credit sales paid in the month after the sale, and another 35% are credit sales paid 2 months after the sale, what are the expected cash receipts for March? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

8 In problem 7, Big City Manufacturing (BCM) assumed that all credit sales were paid in full, which is not realistic. BCM studied its past credit sales and determined that 2.5% of its credit sales resulted in Bad Debts that were never collected. Using the data from the previous problem with the new assumption that 2.5% of credit sales were never collected, what is your revised estimate for the expected cash receipts for March? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

  9. 4 In problem 7, Big City Manufacturing (BCM) assumed that all credit sales were paid in full, with no bad debt expense. For this problem, please assume that bad debt expense is again 0% for BCM. Purchases for next month's sales are 55% of projected sales for the next month, and April sales are estimated to be $495,000; purchases for April are paid in cash in March. "Other payments," which include wages, rent, and taxes, are 25% of sales for the current month. Construct a cash budget for March using your expected cash receipts from problem 7 and calculate the average net cash flow during the month of March. Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

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Answer 1

7.

Cash receipts for March

437250.00

Calculations:

	January	February	March
Sales	450,000.00	375,000.00	555,000.00
20% cash sales	90,000.00	75,000.00	111,000.00
45% collected for the previous month		202,500.00	168,750.00
35% collected for the sales of period 2 months prior			157,500.00
Total cash collection			437,250.00

8.

Cash receipts for March

429093.75

Calculations:

	January	February	March
Sales	450,000.00	375,000.00	555,000.00
20% cash sales	90,000.00	75,000.00	111,000.00
45% collected for the previous month (net of 2.5%)		197,437.50	164,531.25
35% collected for the sales of period 2 months prior (net of 2.5%)			153,562.50
Total cash collection			429,093.75

9.

Net cash flow

26250.00

Calculations:

	March
Total collections from sales (as computed in 7)		437,250.00
less: payments and expenses
Purchases (55% of next month's sales)	272,250.00
Other payments (25% of current month's sale)	138,750.00
Total payments		411,000.00
Net cash flow = collections - payments		26,250.00