Question

KAB Inc., a small retail store, had the following results for May. The budgets for June and July are also given. Sales are collected 80% in the month of the sale and the balance in the month following the sale. (There are no bad debts.) The goods that are sold are purchased in the month prior to sale. Suppliers of the goods are paid in the month following the sale. The "selling and administrative expenses" are paid in the month of the sale. The cash disbursements during the month of June for goods purchased for resale and for selling and administrative expenses should be: Select one: a. $40,000 b. $41,000 c. $42,500 d. $43,500

Answer 1

Answer:

Hi, your question is incomplete as regarding amounts on Sales and Desired Cash Balances.

However important information to tackle this question is given as below :

To determine the Cash disbursements during the month for goods purchased for resale and for selling and administrative expenses, prepare the cash budget.

1. Calculate the Total Cash Receipts

2. Note the Opening Cash Balance brought forward from May

3. Note the Desired Cash Balance at End of the Month

Cash disbursements

Cash disbursements = Cash Receipts - Opening Cash Balance -  Desired Cash Balance at End of the Month

Explanation: