Question

Martin Clothing Company is a retail company that sells hiking and other outdoor gear specially made for the desert heat. It sells to individuals as well as local companies that coordinate adventure getaways in the desert for tourists. The following information is available for several months of the current year:

Month	Sales		Purchases		Cash Expenses Paid
May	$	99,000	$	70,000	$	21,000
June		122,000		90,000		26,500
July		139,000		117,000		34,000
August		128,000		72,000		29,400

The majority of Martin’s sales (70 percent) are cash, but a few of the excursion companies purchase on credit. Of the credit sales, 30 percent are collected in the month of sale and 70 percent are collected in the following month. All of Martin’s purchases are on account with 45 percent paid in the month of purchase and 55 percent paid the following month.

Required:

1. Determine budgeted cash collections for July and August.

2. Determine budgeted cash payments for July and August.

Answer 1

Answer

1.

Cash Collection
	July	August
June	25,620.00	-
July	109,810.00	29,190.00
August	-	101,120.00

Working

It is mentioned that 70% of the sale is made in cash and of remaining 30%, 30% will be received in sale month and 70% in the following month.

Cash Collection
	July	August
June	= ($122,000*30%*70%)	0
July	= ($139,000*70%)+($139,000*30%*30%)	= ($139,000*30%*70%)
August	0	= ($128,000*70%)+($128,000*30%*30%)

2.

Cash Payment
	July	August
Purchases
June	49,500.00	-
July	52,650.00	64,350.00
August	32,400.00	39,600.00
Expenses	34,000.00	29,400.00
Total Cash Payments	168,550.00	133,350.00

Working

It is mentioned that 45% of the Purchases is paid in month of purchase and of remaining 45% will be Paid in following month.

Cash Payment
	July	August
Purchases
June	= ($90,000*55%)	0
July	= ($117,000*45%)	= ($117,000*55%)
August	= ($72,000*45%)	= ($72,000*55%)

Dear Student, if u have any query please feel free to reach me.