Cash Budget Wilson\'s Retail Company is planning a cash budget for the next thre

Question

Cash Budget
Wilson's Retail Company is planning a cash budget for the next three months. Estimated sales revenue is as follows:

All sales are on credit; 60 percent is collected during the month of sale, and 40 percent is collected during the next month. Cost of goods sold is 70 percent of sales. Payments for merchandise sold are made in the month following the month of sale. Operating expenses total $44,000 per month and are paid during the month incurred. The cash balance on February 1 is estimated to be $40,000.

Prepare monthly cash budgets for February, March, and April.

Use negative signs only with beginning and ending cash balances, when appropriate. Do not use negative signs with disbursement answers.

Month Sales Revenue Month Sales Revenue January $300,000 March $200,000 February 205,000 April 190,000

Explanation / Answer

Working notes-

Cash receipt (FEB) = 205000 * 0.60 + 300000 * 0.40 = 243000

Cash receipt (March) = 200000 * 0.60 + 205000 * 0.40 = 202000

Cash receipt (April) = 190000 * 0.60 + 200000 * 0.40 = 194000

Cash disbursement (FEb) = 300000 * 0.70 + 44000 = 254000

Cash disbursement (March) = 205000 * 0.70 + 44000 = 187500

Cash disbursement (April) = 200000 * 0.70 + 44000 = 184000

Wilson's Retail Company
Cash Budgets
February, March, and April February March April Cash balance, beginning $40000 $29000 $43500 Total Cash receipts 243000 202000 194000 Cash available 283000 231000 237500 Total disbursements 254000 187500 184000 Cash balance, ending $29000 $43500 $53500

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---