Question

Crew Clothing (CC) sells women’s resort casual clothing to high-end department stores and in its own retail boutiques. CC expects sales for January, February, and March to be $370,000, $430,000, and $450,000, respectively. Twenty percent of CC’s sales are cash, with the remainder collected evenly over two months. During December, CC’s total sales were $680,000. CC is beginning its budget process and has asked for your help in preparing the cash budget.

Compute CC’s expected cash receipts from customers for each month.

Answer 1

	December	January	February	March
Total sales (i)	680,000	370,000	430,000	450,000
Cash sales (ii)	680,000 x 20% = 136,000	370,000 x 20% = 74,000	430,000 x 20% = 86,000	450,000 x 20% = 90,000
Credit sales (i - ii)	$544,000	$296,000	$344,000	$360,000

Schedule of expected cash collection

	January	February	March
Cash sales	74,000	86,000	90,000
From Dec credit sales	544,000 x 50% = 272,000	544,000 x 50% = 272,000	0
From jan credit sales	0	296,000 x 50% = 148,000	296,000 x 50% = 148,000
From Feb credit sales	0	0	344,000 x 50% = 172,000
Total cash receipt	$346,000	$506,000	$410,000