Cutesy Clothes is trying to determine its cash budget for June. The firm estimat
ID: 2750213 • Letter: C
Question
Cutesy Clothes is trying to determine its cash budget for June. The firm estimates that 2% of sales will be uncollectible. Ten percent (10%) of sales are cash sales collected immediately, 40% are collected in the month after sales and 50% are collected in the second month. Purchases are paid for in the month after purchase. The firm has rent of $20,000, will make a tax payment of $50,000 in June, Selling Expenses will be $15,000 each month. Purchases are paid in the month after purchase. The targeted cash is $80,000 and the beginning cash in June is $82,000. Create the cash budget for June and July.
Explanation / Answer
June July Opening cash balance 82,000 (20,100) ADD: Sales collection(refer working) 102,900 106,820 Less: Purchase payments May (120,000) June (100,000) Rent payment (20,000) (20,000) Tax payment (50,000) Selling expenses (15,000) (15,000) Closing cash balance (20,100) (48,280) Sales cash collection working: April May June July Sales month 100,000 110,000 110,000 100,000 Less: Bad debt 2% (2,000) (2,200) (2,200) (2,000) Net sales 98,000 107,800 107,800 98,000 Collection month April sale 49,000 May Sale 43,120 53,900 June 10,780 43,120 July 9,800 Total cash collection 102,900 106,820