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    Accounting problem cash budget

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    3.The following is a forecast of sales and purchases by American Food Products
    for the first four months of 2006.

    month1 month2 month3 month4

    credit sales 250,000.00 285,000.00 265,000.00 240,000.00

    credit purchases 120,000.00 140,000.00 130,000.00 110,000.00

    Insurance, rent, wages, and other expenses are 2%, 5%, 8%, and 1% of sales

    1. On the average 70% of credit sales is paid in the month of sales,
    and 30% one month following sales.
    2. On the average 50% of credit purchases is paid in the month of purchase,
    50% one month following purchase.

    Prepare a simple cash budget for the next four months of 2006.

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    Solution Summary

    Accounting problem cash budgets are examined.