Chadmark Corporation's budgeted monthly sales are $3,000.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 $1,500.Other payments for wages,rent,and taxes are constant at $700 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

Cash receipts:
40% of $3,000 = $1,200 will be received in the first month with a 2% discount
60% of $3,000 = $1,800 will be received in the second month without a discount
Total cash receipts = $1,200 + $1,800 = $3,000
 
Cash disbursements:
Purchases = $1,500
Wages, rent, and taxes = $700
Total cash disbursements = $1,500 + $700 = $2,200
 
Net cash inflow = Cash receipts - Cash disbursements = $3,000 - $2,200 = $800
 
Average cash gain or (loss) = 0 since the net cash inflow is positive. Therefore, the answer is C, $776.

Chadmark Corporation's Budgeted Monthly Sales Are $3,000