Cash Budget Pasadena Candle Inc. pays 40% of its purchases on account in the month of the purchase and 60% in the month following the purchase. If purchases are budgeted to be $40,000 for August and $36,000 for September. Prepare a simple cash budget for Pasadena Candle Inc. Pasadena Candle Inc. Schedule of Cash Payments for Purchases For the Month Ending September $ Total payments for purchases on account $

Total payments for purchases on account $38,400

Explanation:

September Payments for Purchases  include

Schedule of Cash Payments for Purchases For the Month Ending September

September Sales ($36,000×40%) = $14,400

August Sales ($40,000×60%)       = $24,000

Total                                                = $38,400

Th e cash payments in the month of September is $38,400

Explanation:

                                                      August          September

Cash payment                              $16,000           $14,400  

balance of August purchases                           $24,000

September  total payments                                 $38,400

In August 40% of $40,000 would be paid since $40,000 was the worth of the purchases in August i,e $40000*40%=$16,000

In September the remaining 60% of $40,000 is due for payment i.e $40,000*60%=$24,000

In September 40% of the month purchases is due for payment,that is $36,000*40%=$14,400

The balance of 60% of $36,000 would be paid in  October.

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