NARRBEGIN: Silly Sally
Silly Sally,Inc.
Silly Sally,Inc.forecasts the following sales levels: January,$420; February,$435; March,$450; and April,$470.Historically,40% of its sales are for cash.Of the remaining sales,80% are collected in one month,15% are collected in the second month,while the rest remain uncollected.November sales were $380 and December sales were $500.(all values $000)
Purchases are made at 60% of the next month's sales forecast,and are paid for in the month of purchase.Other cash outlays are: rent,$10 monthly; wages and salaries,$50 monthly; a tax payment of $30 in March; an interest payment of $15 in March; and a planned purchase of $20 of new fixed assets in January.
-What is Silly Sally's change in cash for March?

Question

Quizplus · Accepted Answer

March sales are $450,000. 40% of sales are for cash, so cash sales are $450,000 x 0.40 = $180,000. Of the remaining sales, 80% are collected in one month, so collections from February sales are $435,000 x 0.80 = $348,000. Collections from January sales are $420,000 x 0.15 = $63,000. Total cash collections in March are $180,000 + $348,000 + $63,000 = $591,000. Purchases for March are 60% of April sales, or $470,000 x 0.60 = $282,000. Other cash outlays in March are $10 (rent) + $50 (wages and salaries) + $30 (tax payment) + $15 (interest payment) = $105. Total cash outlays in March are $282,000 + $105 = $387,000. Silly Sally's change in cash for March is $591,000 - $387,000 = $204,000.

NARRBEGIN: Silly Sally Silly Sally,Inc