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

40% of September Sales 60% of August Sales

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.