Cutesy Clothes is trying to determine its cash budget for June. The firm estimat

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

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