Question

The following information pertains to the January operating budget for Casey Corporation.
∙ Budgeted sales for January $200,000 and February $100,000.
∙ Collections for sales are 60% in the month of sale and 40% the next month.
∙ Gross margin is 30% of sales.
∙ Administrative costs are $10,000 each month.
∙ Beginning accounts receivable is $20,000.
∙ Beginning inventory is $14,000.
∙ Beginning accounts payable is $65,000. (All from inventory purchases.)
∙ Purchases are paid in full the following month.
∙ Desired ending inventory is 20% of next month's cost of goods sold (COGS).
Compute the following:
1) Budgeted Cash collections for January.
2) Budgeted Cash Payment for January.

Answer 1

Answer:

1) Budgeted Cash collections for January = $140,000

2) Budgeted Cash Payment for January = $75,000

Explanation:

The Calculation of Budgeted Cash Collections and Budgeted Cash Payments are all done in the Cash Budget.

Here is an extract considering the details given :

                                                      January

Cash Collections :

Cash Sales (60%×200,000)        $120,000

Credit Sales                                   $20,000

Total                                              $140,000

Cash Payments   :

Administrative costs                      $10,000

Purchases                                      $65,000

Total                                               $75,000