Worton Distributing expects its September sales to be 25% higher than its August sales of $150,000.Purchases were $100,000 in August and are expected to be $120,000 in September.All sales are on credit and are expected to be 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 beginning cash balance on September 1 is $10,000.The ending cash balance on September 30 would be:

Question

Quizplus · Accepted Answer

September sales = 150,000 * 1.25 = $187,500. Collections in September include 30% of September sales and 70% of August sales (150,000). So, collections = (187,500 * 0.3) + (150,000 * 0.7) = 56,250 + 105,000 = $161,250. Payments in September include 25% of September purchases and 75% of August purchases (100,000). So, payments = (120,000 * 0.25) + (100,000 * 0.75) = 30,000 + 75,000 = $105,000. The ending cash balance = Beginning balance + Collections - Payments = 10,000 + 161,250 - 105,000 = $66,250.

Worton Distributing Expects Its September Sales to Be 25% Higher