Question

E8-18 Preparing Cash Receipts and Cash Payments Budgets [LO 8-4]

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	$	100,000	$	60,000	$	19,000
June		116,000		93,000		26,000
July		136,000		117,000		35,750
August		129,000		79,000		32,900

The majority of Martin’s sales (70 percent) are cash, but a few of the excursion companies purchase on credit. Of the credit sales, 30 percent are collected in the month of sale and 70 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. (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

Answer 1

SOLUTION

1. Budgeted cash collections

	July ($)	August ($)
Cash sales ($136,000*70%),($129,000*70%)	95,200	90,300
Credit sales:
June sales ($116,000*30%*70%)	24,360
July sales ($136,000*30%*30%), ($136,000*30%*70%)	12,240	28,560
August sales ($129,000*30%*30%)		11,610
Budgeted cash collections	131,800	130,470

2. Budgeted cash payments

	July ($)	August ($)
June Purchases ($93,000*45%)	41,850
July Purchases ($117,000*55%), ($117,000*45%)	64,350	52,650
August Purchases ($79,000*55%)		43,450
Cash Expense	35,750	32,900
Budgeted Cash Payments	141,950	129,000