XYZ Corp, a retailer, makes both cash and credit sales (i.e. sales on open accou

Question

XYZ Corp, a retailer, makes both cash and credit sales (i.e. sales on open account). Information regarding budgeted sales for the first quarter of the year is as follows: Inventory purchases each month are 80 % of that month's projected sales. All merchandise purchases are made on credit. On average, the company pays 70% of its purchases in the month of purchase and the remainder is paid in the following month. No each discounts for early payment are in effect. Calculate the estimated cash payments for merchandise for February and March.

Explanation / Answer

Particulars January February March Cash Sales 130000 150000 80000 Credit Sales 150000 160000 140000 Total 280000 310000 220000 Inventory Purchases 224000 248000 176000 70% paid in the month of purchase 156800 173600 123200 30% paid in the following month 67200 74400

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