Wilson\'s Retail Company is planning a cash budget for the next three months. Es

Question

Wilson's Retail Company is planning a cash budget for the next three months. Estimated sales revenue is as follows: Month Sales Revenue Month Sales Revenue January $300,000 March $200,000 February 205,000 April 185,000 All sales are on credit; 60 percent is collected during the month of sale, and 40 percent is collected during the next month. Cost of goods sold is 80 percent of sales. Payments for merchandise sold are made in the month following the month of sale. Operating expenses total $41,000 per month and are paid during the month incurred. The cash balance on February 1 is estimated to be $40,000.

Explanation / Answer

cash collection Feb March april jan (300,000*40%) 120000 Feb (205000*60%;40%) 123000 82000 March (200,000*60%;40%) 120000 80000 April (185000*60%) 111000 total cash collection 243000 202000 191000 cost of goods sold jan Feb March april cost of goods sold 240000 164000 160000 148000 cash payment 240,000 164,000 160,000 operating expense 41,000 41,000 41,000 total cash disbursement 281,000 205,000 201,000 Cash budget Feb March april Cash balance,beginning 40,000 2,000 -1,000 total cash receipts 243,000 202,000 191,000 cash available 283,000 204000 190000 total disbursements 281,000 205,000 201,000 cash balance,ending 2,000 -1,000 -11000

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