Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
-If the opening cash balance at the beginning of the month is $27,500, total cash inflows for the month are $38,000 and total cash outflows are $78,000k the opening cash balance at the beginning of the next month is:
A) $12,500 (deficit)
B) cannot be calculated
C) $67,500 (surplus)
D) $12,500 (surplus)

Question

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016.  Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
-If the opening cash balance at the beginning of the month is $27,500, total cash inflows for the month are $38,000 and total cash outflows are $78,000k the opening cash balance at the beginning of the next month is:
A) $12,500 (deficit) 
B) cannot be calculated 
C) $67,500 (surplus) 
D) $12,500 (surplus)

Quizplus · Accepted Answer

Cash inflows = 60% of sales + 40% of sales for the next month = $38,000
Total cash outflows = $78,000
Net cash outflow = $40,000
Closing cash balance = Opening cash balance - Net cash outflow = $27,500 - $40,000 = -$12,500 (deficit)
Therefore, the correct answer is A) $12,500 (deficit).

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