Chadmark Corporation's budgeted monthly sales are R3,000.Forty percent of its customers pay in the first month and take the 2 percent discount.The remaining 60 percent pay in the month following the sale and don't receive a discount.Chadmark's bad debts are very small and are excluded from this analysis.Purchases for next month's sales are constant each month at R1,500.Other payments for wages, rent, and taxes are constant at R700 per month.Construct a single month's cash budget with the information given and determine the average cash gain or (loss) during a typical month for Chadmark Corporation.

Question

Quizplus · Accepted Answer

Step 1: Calculate the cash receipts
- 40% of R3,000 = R1,200 received in the first month with a 2% discount
- 60% of R3,000 = R1,800 received in the second month with no discount
- Total cash receipts = R1,200 + R1,800 = R3,000

Step 2: Calculate the cash disbursements
- Purchases for next month's sales are constant at R1,500
- Other payments for wages, rent, and taxes are constant at R700
- Total cash disbursements = R1,500 + R700 = R2,200

Step 3: Calculate the net cash gain or (loss)
- Net cash gain/loss = cash receipts - cash disbursements
- Net cash gain/loss = R3,000 - R2,200 = R800

Therefore, the average cash gain during a typical month for Chadmark Corporation is R776 (answer C), not R800.

Chadmark Corporation's Budgeted Monthly Sales Are R3,000