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Mitchell, Inc. needs to develop a cash budget for Q1 2020. Sales in January, February and...

Mitchell, Inc. needs to develop a cash budget for Q1 2020. Sales in January, February and March are expected to be $20,000, $22,500 and $24,650 respectively. 30% of all sales are paid cash. 50% of sales are paid within 1 month and 20% are paid within 2 months. The company spends $14,000 a month to operate the business. Create the cash budget for Q1 2020.

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Answer #1
Particulars January February March
Opening Cash Balance - (-8000) (-5250)
Cash receipts :-
Cash Sales 6000 6750 7395
Credit Sales payment received on 1st month - 10000 11250
Credit Sales payment received 2nd month 4000
Total 6000 8750 17395
Cash payment:-
Business Operation 14000 14000 14000
Closing Cash Balance (-8000) (-5250) 3395

Working note:

Sales (on January)

30% of sales is paid cash at time of sales

So, in JAN - 20000*30% = 6000

50% paid in next month (will receive on Feb)

So, in feb - 20000*50%- 10000

balance will paid on 2 month (March)

Mar- 20000*20% = 4000

The company will spend 14000 each month for the operate the business

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