Martin Clothing Company is a retail company that sells hiking and other outdoor

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:

The majority of Martin’s sales (65 percent) are cash, but a few of the excursion companies purchase on credit. Of the credit sales, 25 percent are collected in the month of sale and 75 percent are collected in the following month. All of Martin’s purchases are on account with 60 percent paid in the month of purchase and 40 percent paid the following month.

1. Determine budgeted cash collections for July and August

Budgeted Cash Collections

2. Determine budgeted cash payments for July and August.

  Month Sales Purchases Cash
Expenses
Paid   May $ 92,000     $ 62,000     $ 22,000       June 116,000     89,000     25,000       July 138,000     114,000     33,000       August 132,000     77,000     30,100    

Explanation / Answer

(1)

NOTE: First question is answered.

SALES SCHEDULE May June July Aug Total Sales ($) 92,000 1,16,000 1,38,000 1,32,000 Cash Sales: 65% ($) 59,800 75,400 89,700 85,800 Credit Sales: 35% ($) 32,200 40,600 48,300 46,200 CASH COLLECTION SCHEDULE May June July Aug Cash Collected: 25% of Credit Sales of current month ($) (1) 8,050 10,150 12,075 11,550 Cash Collected: 75% of Credit Sales of previous month ($) (2) 24,150 30,450 36,225 ADD: Cash Collected: Cash Sales of current month ($) (3) 59,800 75,400 89,700 85,800 Total Cash Collected ($) (1) + (2) + (3) 67,850 1,09,700 1,32,225 1,33,575

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