Question

. Tierney Enterprises is constructing its cash budget. Its budgeted monthly sales are $5,000, 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 net cash flow during the month. a. $1,092 b. $1,150 c. $1,210 d. $1,271 e. $1,334

Answer 1

b.$1,150

Step-by-step explanation:

Sales Collection $5,000*.98 $4,900

Payment of purchases $5,000*50% ($2,500)

Other payments $5,000*25% ($1,250)

Net Cash flow during a typical month $1,150