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 | $91,000 | $61,000 | 20,000 |
June | 123,000 | 88,000 | 27,500 |
July | 136,000 | 119,000 | 36,500 |
August | 129,000 | 74,000 | 30,100 |
The majority of Martin’s sales (75 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. (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 |
1.
Budgeted cash collections for July = July cash sales + 40% of July credit sales + 60% of June credit sales
= ($136,000*75%) + ($136,000*25%*40%) + ($123,000*25%*60%)
= $102,000 + $13,600 + $18,450
= $134,050
Budgeted cash collections for August = August cash sales + 40% of August credit sales + 60% of July credit sales
= ($129,000*75%) + ($129,000*25%*40%) + ($136,000*25%*60%)
= $96,750 + $12,900 + $20,400
= $130,050
July | August | |
Budgeted cash collections | $134,050 | $130,050 |
2.
Budgeted cash payments for July = 55% of July purchases + 45% of June purchases
= ($119,000*55%) + (88,000*45%)
= $65,450 + $39,600
= $105,050
Budgeted cash payments for August = 55% of August purchases + 45% of July purchases
= ($74,000*55%) + ($119,000*45%)
= $40,700 + $53,550
= $94,250
July | August | |
Budgeted cash payments | $105,050 | $94,250 |
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