E8-18 Preparing Cash Receipts and Cash Payments Budgets [LO 8-4] Martin Clothing

Question

E8-18 Preparing Cash Receipts and Cash Payments Budgets [LO 8-4]

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 (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 55 percent paid in the month of purchase and 45 percent paid the following month.

Required:
1. Determine budgeted cash collections for July and August. (Round your intermediate calculations and final answers to nearest whole dollar.)

2. Determine budgeted cash payments for July and August.

Month Sales Purchases Cash Expenses Paid May $ 100,000 $ 60,000 $ 19,000 June 116,000 93,000 26,000 July 136,000 117,000 35,750 August 129,000 79,000 32,900

Explanation / Answer

SOLUTION

1. Budgeted cash collections

2. Budgeted cash payments

July ($) August ($) Cash sales ($136,000*70%),($129,000*70%) 95,200 90,300 Credit sales: June sales ($116,000*30%*70%) 24,360 July sales ($136,000*30%*30%), ($136,000*30%*70%) 12,240 28,560 August sales ($129,000*30%*30%) 11,610 Budgeted cash collections 131,800 130,470

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