Wilson\'s Retail Company is planning a cash budget for the next three months. Es

Question

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

January: $300,000

February: $250,000

March: $200,000

April: $150,000

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 80 percent of sales. Payments for merchandise sold are made in the month following the month of sale. Operating expenses total $42,000 per month and are paid during the month incurred. The cash balance on February 1 is estimated to be $30,000.

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

Explanation / Answer

240000

(300000*80%)

200000

(250000*80%)

160000

(200000*80%)

120000

(150000*80%)

Cash Budget:

150000

(250000*60%)-feb

120000

(200000*60%)-March

90000

(150000*60%)-April

120000

(300000*40%)-jan

100000

(250000*40%)-feb

80000

(200000*40%)-March

Particulars Jan Feb March April Sales($) 300000 250000 200000 150000 COGS=80% of sales

240000

(300000*80%)

200000

(250000*80%)

160000

(200000*80%)

120000

(150000*80%)

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