Question

Crew Clothing (CC) sells women's resort casual clothing to high-end department stores and in its own retail boutiques. CC expects sales for January, February, and March to be $430,000, $490,000, and $510,000, respectively. Twenty percent of CC's sales are cash, with the remainder collected evenly over two months. During December, CC's total sales were $740,000. CC is beginning its budget process and has asked for your help in preparing the cash budget. Compute CC's expected cash receipts from customers for each month January February March Budgeted Cash Receipts

Answer 1

Credit sales of December = 740,000 x 80%

= $592,000

Credit sales of January = 430,000 x 80%

= $344,000

Credit sales of February = 490,000 x 80%

= $392,000

Credit sales of March = 510,000 x 80%

= $408,000

Schedule of expected cash collections

	January	February	March
Cash sales	430,000 x 20% = 86,000	490,000 x 20% = 98,000	510,000 x 20% = 102,000
From December credit sales	592,000 x 50% = 296,000	0	0
From January credit sales	344,000 x 50% = 172,000	344,000 x 50% = 172,000	0
From February credit sales	0	392,000 x 50% = 196,000	392,000 x 50% = 196,000
From March credit sales	0	0	408,000 x 50% = 204,000
Total cash receipts	$554,000	$466,000	$502,000

	January	February	March
Budgeted cash receipts	$554,000	$466,000	$502,000

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