Bolin's, an elite clothier, expects its November sales to be 30% higher than its October sales of $200,000. Purchases were $100,000 in October and are expected to be $150,000 in November. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Purchases are paid 25% in the month of purchase and 75% in the following month. The cash balance on November 1 is $9,000. What will be the cash balance on November 30?

Question

Quizplus · Accepted Answer

November sales = 200,000 * 1.3 = $260,000. Collections in November include 30% of November sales ($260,000 * 30% = $78,000) and 70% of October sales ($200,000 * 70% = $140,000). Total collections = $78,000 + $140,000 = $218,000. Payments in November include 25% of November purchases ($150,000 * 25% = $37,500) and 75% of October purchases ($100,000 * 75% = $75,000). Total payments = $37,500 + $75,000 = $112,500. Starting cash balance = $9,000. Ending cash balance = Starting balance + Collections - Payments = $9,000 + $218,000 - $112,500 = $114,500.

Bolin's, an Elite Clothier, Expects Its November Sales to Be