KAB Incorporated, 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 June for goods purchased for sale and for selling and administrative expenses should be:

Question

KAB Incorporated, 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 June for goods purchased for sale and for selling and administrative expenses should be:

Quizplus · Accepted Answer

- Sales for May = $60,000
- Collection in May = $60,000 x 80% = $48,000
- Collection in June = $60,000 x 20% = $12,000
- Purchases for June (goods sold in July) = $50,000
- Selling and administrative expenses for June = $9,000
- Total cash disbursement in June = Purchases for June + Selling and administrative expenses for June = $50,000 + $9,000 = $41,000

KAB Incorporated, a Small Retail Store, Had the Following Results