The following information is available from the controller\'s records for Penelo

Question

The following information is available from the controller's records for Penelope, Ltd.: Sales Purchases May $60,000 $20,000 June 70,000 30,000 July 80,000 25,000 All sales are on credit. Records show that 80 percent of the customers pay during the month of the sale, 15 percent pay the month after the sale, and the remaining 5 percent pay the second month after the sale. Purchases are all paid the following month at a 1 percent discount. Cash disbursements for operating expenses in July were $8,000. Prepare a cash budget for July.

Explanation / Answer

Cash purchases are paid in the following month at 1% discount

Payment in July = Payment for the June purchase - 1% discount = $30000 - 1% of $30000 = $29700

Particulars $ Cash collected from July sales (80% of $80000) 64000 Cash collected form June Sales (15% of $70000) 10500 Cash Collected from May Sales (5% of $60000) 3000    Total collection in July 77500

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