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: Cash Expenses Month May June July August Sales PurchasesPaid $ 93,000 $ 62,000 S 23,000 25,500 35,750 32,900 123,000 135,000 127,000 93,000 112,000 79,000 The majority of Martin's sales (60 percent) are cash, but a few of the excursion companies purchase on credit. Of the credit sales, 40 percent are collected in the month of sale and 60 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. (Round your intermediate calculations and final answers to nearest whole dollar.) July August Budgeted Cash Collections 2. Determine budgeted cash payments for July and August. July August Budgeted Cash Payments

Explanation / Answer

1. Cash sales = 60%.

Credit sales = 40%.

Collection pattern = 40% in the month of sale, 60% in the following month.

Cash sales for July = 135,000 * 60% = 81,000.

Cash sales for August = 127,000 * 60% = 76,200.

Credit sales for July = 135,000 * 40% = 54,000.

Credit sales for August = 127,000 * 40% = 50,800.

Credit sales for June = 123,000 * 40% = 49,200.

Budgeted cash collections for July = July cash sales + 40% of july credit sales + 60% of june credit sales.

= 81,000 + (54,000*40%) + (49,200*60%).

= 81,000 + 21,600 + 29,520.

= 132,120.

Budgeted cash collections for August = August cash sales + 40% of August credit sales + 60% of july credit sales.

= 76,200 + (50,800*40%) + (54,000*60%).

= 76,200 + 20,320 + 32,400.

= 128,920.

2. Payment pattern for purchases = 45% in the month of purchase, 55% in the following month.

Cash payments in July = Cash expenses paid + 45% of July purchases + 55% of June purchases.

= 35,750 + (112,000*45%) + (93,000*55%).

= 35,750 + 50,400 + 51,150.

= 137,300.

Cash payments in August = Cash expenses paid + 45% of August purchases + 55% of July purchases.  

= 32,900 + (79,000*45%) + (112,000*55%).

= 32,900 + 35,550 + 61,600.

= 130,050.

July August Budgeted cash collections 132,120 128,920

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.