Problem:
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 the in the month following the sale and do not reveive 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," whcih include wages, rent, and taxes, are 25% of sales for the current month.
Required:
Question: Construct a cash budget for a typical month and calculate the average net cash flow during the month.
Note: Show supporting computations in good form.