Magenta Corporation has the following sales forecasts for the selected three-month period for the current year: $$\begin{array} { l r }
\text { Month } & \text { Sales } \
\text { July } & \$ 30,000 \
\text { August } & 15,000 \
\text { September } & 12,000
\end{array}$$ All sales are on account. Sixty percent of sales are collected in the month of the sale, and the remainder are collected in the following month. $\begin{array} { l }
\text {Accounts receivable balance (July 1) }&\$28,000\
\text { Cash balance (July 1)}&17,000\
\end{array}$
Minimum cash balance is $13,000. Cash can be borrowed in $2,000 increments from the local bank (assume no interest charges). What is the cash balance at the end of July, assuming that cash is received only from customers and that $53,000 is paid out during July?
A)$25,000
B)$18,500
C)$20,200
D)$14,000

Question

Magenta Corporation has the following sales forecasts for the selected three-month period for the current year: $$\begin{array} { l r } 
\text { Month } & \text { Sales } \
\text { July } & \$ 30,000 \
\text { August } & 15,000 \
\text { September } & 12,000
\end{array}$$ All sales are on account. Sixty percent of sales are collected in the month of the sale, and the remainder are collected in the following month. $\begin{array} { l  }
 \text {Accounts receivable balance (July 1) }&\$28,000\
 \text { Cash balance (July 1)}&17,000\
\end{array}$
 Minimum cash balance is $13,000. Cash can be borrowed in $2,000 increments from the local bank (assume no interest charges). What is the cash balance at the end of July, assuming that cash is received only from customers and that $53,000 is paid out during July?
A)$25,000
B)$18,500
C)$20,200
D)$14,000

Quizplus · Accepted Answer

The cash collected in July is 60% of July sales ($30,000) plus 40% of June sales (from accounts receivable, $28,000). This equals $18,000 + $11,200 = $29,200. The cash balance at the start of July is $17,000. Total cash available is $46,200. After paying out $53,000, the cash balance would be negative, so $8,000 needs to be borrowed to maintain a minimum balance of $13,000. Thus, the cash balance at the end of July is $14,000.

Magenta Corporation Has the Following Sales Forecasts for the Selected