Q16SE

Question

Preparing a financial budget—schedule of cash payments

Jefferson Company has budgeted purchases of merchandise inventory of $457,500 in January and $533,250 in February. Assume Jefferson pays for inventory purchases 70% in the month of purchase and 30% in the month after purchase. The Accounts Payable balance on December 31 is $98,275. Prepare a schedule of cash payments for purchases for January and February.

Step-by-Step Solution

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Answer

Answer

Total cash receipts from the customers is $535,180 in the month of January and $450,220 in the month of February.

1Step 1: Meaning of schedule of cash receipts

The schedule of cash receipts is prepared to record the cash received from the customers.

2Step 2: Preparation of schedule of cash receipts

Particulars	January	February
Total budgeted merchandise inventory	$457,500	$533,250
Cash payments:
70 % in the month of purchase	$320,250	$373,375
30% in the month after purchase	$98,275	$457,500*30% =$137,250
Total cash payments	$418,525	$510,625

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