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 $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

Homework Answers

Answer #1

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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