Problem: The following is a forecast of sales and purchases by American Food Products for the first four months of 2006.
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month1
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month2
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month3
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month4
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credit sales
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250,000.00
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285,000.00
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265,000.00
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240,000.00
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credit purchases
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120,000.00
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140,000.00
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130,000.00
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110,000.00
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Insurance, rent, wages, and other expenses are 2%, 5%, 8%, and 1% of sales respectively.
Notes:
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.
REQUIRED: Prepare a simple cash budget for the next four months of 2006.