Question

Martin Clothing Company is a retail company that sells hiking and other outdoor gear specially made...

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:

Month

Sales

Purchases

Cash Expenses Paid

May

$

120,000

$

90,000

$

24,000

June

115,000

95,000

31,000

July

160,000

150,000

38,250

August

145,000

80,000

34,700


The majority of Martin’s sales (70 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 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.

    

July

August

Budgeted Cash Collections



2. Determine budgeted cash payments for July and August.

July

August

Budgeted Cash Payments

Homework Answers

Answer #1
1
July August
Budgeted Cash Collections 151900 147700
2
July August
Budgeted Cash Payments 163500 146200
Workings:
July August
Cash sales 112000 101500
Credit sales:
June sales 20700 0
July sales 19200 28800
August sales 0 17400
Budgeted Cash Collections 151900 147700
July August
June purchases 42750
July purchases 82500 67500
August purchases 0 44000
Cash Expenses Paid 38250 34700
Budgeted Cash Payments 163500 146200
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