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, 70 percent pay her the month after the sale and 30 percent pay the following month. Chelsea pays cash for 20 percent of her purchases. The other 80 percent she pays off by the end of the next month. Chelsea's operating expenses are paid the month after incurred. Her operating expenses are about $7,500 each month, $500 of which is depreciation. Selling expenses have a fixed and a variable component. The fixed is $1,400 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.

Answer 1

Cash budget for the month of May

Particulars	Amt(in $)	Explanation
Opening Balance	9,000
Add:Cash receipts
Cash sales	120,000	(150,000*0.8)
Credit sale collection for sale in April	19,600	(140,000*0.2*0.7)
Credit sale collection for sale in March	7,800	(130,000*0.2*0.3)
Total cash at the beginning of the month(A)	156,400
Cash payments:
Cash purchases	26,000	(130,000*0.2)
Payments for the purchases in April	100,000	(125000*0.8)
Operating expenses for April	7000	(epreciation is not a cash expenditure)
Selling expenses-fixed	1,400
Selling expenses -variable	15,000	(150,000*0.1)
Total payments(B)	149,400
Cash balance at the end of the month(C)=(A)-(B)	7,000