The expected sales for Uptown Clothing in the month of May are shown in the tabl
ID: 2599054 • Letter: T
Question
The expected sales for Uptown Clothing in the month of May are shown in the table below. Chelsea Rogers, the owner, gives credit to a select group of customers (20 percent of sales), but all others must pay cash. Of Chelsea's credit customers, 80 percent pay her the month after the sale and 20 percent pay the following month.
Chelsea pays cash for 10 percent of her purchases. The other 90 percent she pays off by the end of the next month. Chelsea's operating expenses are paid the month after incurrence. Her operating expenses are about $7,000 each month, $500 of which is depreciation. Selling expenses have a fixed and a variable component. The fixed is $1,500 a month, and the variable is 10 percent of sales. Chelsea began May with $9,000 in cash.
Sales
Purchases
March
$130,000
$120,000
April
140,000
125,000
May
150,000
130,000
Prepare a cash budget to determine Uptown Clothing's ending cash balance for May. Use attached accounting paper.
Sales
Purchases
March
$130,000
$120,000
April
140,000
125,000
May
150,000
130,000
Explanation / Answer
Closing balance of Cash is Rs.8100
Sales
Purchases
Operating expenses include 500 of depreciation
Since depreciation is a non cash expenditure it is excluded and Cash operating expenses are 7000-500=6500
Operating expenses are paid in next month
Selling expenses
Assuming selling expenses are paid in the current month itself
Fixed selling expenses of 1500
Variable selling expense of 10 % of sales (assuming total sales)
Cash Budget of Uptown Clothing Particulars March April May June July Opening Balance 9000 Sales 104000 132800 147600 29600 6000 Total Cash Income 104000 132800 147600 29600 6000 Less: Purchases 12000 120500 125500 117000 Operating Expenses 6500 6500 6500 6500 Selling Expenses Fixed 1500 1500 1500 1500 1500 Variable 13000 14000 15000 0 0 Total Cash Expenses 26500 142500 148500 125000 8000 Closing Balance 8100Related Questions
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