Nogueiras Corp's budgeted monthly sales are $3,000,and they are constant from month to month.40% of its customers pay in the first month and take the 2% discount,while the remaining 60% pay in the month following the sale and do not receive a discount.The firm has no bad debts.Purchases for next month's sales are constant at 50% of projected sales for the next month."Other payments",which include wages,rent,and taxes,are 25% of sales for the current month.Construct a cash budget for a typical month and calculate the average cash gain or loss during the month.Do not round intermediate calculations.

Question

Quizplus · Accepted Answer

Cash Budget for a Typical Month:

Cash Receipts:
- Collections from current month sales = $1,140 (60% of $3,000)
- Collections from previous month sales = $1,176 (40% of $3,000 * 0.98 discount)
Total Cash Receipts = $2,316

Cash Payments:
- Purchases for next month sales = $1,500 (50% of projected sales of $3,000)
- Other payments = $750 (25% of current month sales of $3,000)
Total Cash Payments = $2,250

Net Cash Gain/Loss = Cash Receipts - Cash Payments
Net Cash Gain/Loss = $2,316 - $2,250
Net Cash Gain/Loss = $66

Therefore, the average cash gain or loss during the month is $66.

The best choice is D based on the calculated cash budget and net cash gain/loss.

Nogueiras Corp's Budgeted Monthly Sales Are $3,000,and They Are Constant