Crew Clothing (CC) sells women’s resort casual clothing to high-end department s

Question

Crew Clothing (CC) sells women’s resort casual clothing to high-end department stores and in its own retail boutiques. CC expects sales for January, February, and March to be $420,000, $480,000, and $500,000, respectively. Twenty percent of CC’s sales are cash, with the remainder collected evenly over two months. During December, CC’s total sales were $730,000. CC is beginning its budget process and has asked for your help in preparing the cash budget. Compute CC’s expected cash receipts from customers for each month.

Explanation / Answer

Schedule of expected cash collections

192,0000 (480,000*80%*50%)

January February March Cash sales 84,000 (420,000*20%) 96,000 (480,000*20%) 100,000 (500,000*20%) Credit sales collected in the month of sale 168,000 (420,000*80%*50%) 192,000 (480,000*80%*50%) 200,000 (500,000*80%*50%) Credit sales collected in the month following the sale 292,000 (730,000*80%*50%) 168,000 (420,000*80%*50%)

192,0000 (480,000*80%*50%)

Total cash receipts 544,000 456,000 492,000

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