Budgeted cash collections; budgeted cash payments Information pertaining to STW Ltd’s sales revenue is presented as follows.

November 2021 December 2021 January 2022

(Actual) (Budget) (Budget)

$ $ $

Cash sales 80 000 100 000 60 000 Credit sales 240 000 360 000 180 000 Total sales 320 000 460 000 240 000 Management estimates that 5 per cent of credit sales are uncollectable. Of the credit sales that are collectable, 60 per cent are collected in the month of sale and the remainder in the month following the sale.

Purchases of inventory each month are 70 per cent of the next month’s projected total sales. All purchases of inventory are on account; 25 per cent are paid in the month of purchase, and the remainder are paid in the month following the purchase.

Required:

1 What are STW Ltd’s budgeted cash collections in December 2021 from November 2021 credit sales?

2 What are total budgeted cash receipts in January 2022?

3 What is STW Ltd’s budgeting for total cash payments in December 2021 for inventory purchases?