Assume Laksko's has credit sales of $462,400 in March, $507,500 in April, and $550,200 in May. Also assume that 64 percent of sales are collected in the month of sale, 35 percent are collected in the following month, and the remainder are never collected. Credit purchases are $224,600 in March, $236,700 in April, and $252,700 in May. Credit purchases are paid in 30 days. Interest is $12,400 a month, wages and other expenses are $64,400 a month. Fixed assets purchases of $119,500 are scheduled for April with additional purchases of $56,400 in May. The April 1 cash balance was $321,060 and taxes of $180,000 must be paid on April 15. What is the cash balance at the end of May?

Question

Quizplus · Accepted Answer

To calculate the cash balance at the end of May, we need to consider the inflows and outflows of cash during March, April, and May.**March:**- Credit Sales: $462,400- Collections: 64% of March sales = $462,400 * 64% = $295,936- There are no collections from previous months since we're starting in March.- Credit Purchases: $224,600 (paid in April)- Fixed Assets: No purchase in March- Interest, Wages, and Other Expenses: $12,400 + $64,400 = $76,800- Taxes: No taxes in March**April:**- Credit Sales: $507,500- Collections: 64% of April sales + 35% of March sales = ($507,500 * 64%) + ($462,400 * 35%) = $324,800 + $161,840 = $486,640- Credit Purchases: $236,700 (paid in May)- Fixed Assets: $119,500- Interest, Wages, and Other Expenses: $76,800- Taxes: $180,000**May:**- Credit Sales: $550,200- Collections: 64% of May sales + 35% of April sales = ($550,200 * 64%) + ($507,500 * 35%) = $352,128 + $177,625 = $529,753- Credit Purchases: $252,700 (paid in June, so not considered for May's cash balance)- Fixed Assets: $56,400- Interest, Wages, and Other Expenses: $76,800**Calculating Cash Balance:**Starting Cash Balance (April 1): $321,060**April 1-30:**- Collections from Sales: $486,640- Payments for March Purchases: -$224,600- Fixed Assets Purchase in April: -$119,500- Interest, Wages, and Other Expenses: -$76,800- Taxes: -$180,000April Cash Flow = $486,640 - $224,600 - $119,500 - $76,800 - $180,000 = -$114,260April Ending Cash Balance = $321,060 - $114,260 = $206,800**May 1-31:**- Collections from Sales: $529,753- Payments for April Purchases: -$236,700- Fixed Assets Purchase in May: -$56,400- Interest, Wages, and Other Expenses: -$76,800May Cash Flow = $529,753 - $236,700 - $56,400 - $76,800 = $159,853May Ending Cash Balance = $206,800 + $159,853 = $366,653Therefore, the correct answer is E) $366,653.

Assume Laksko's Has Credit Sales of $462,400 in March, $507,500