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

The correct answer is A.Silly Sally's change in cash for March is a $40 increase in cash. This is calculated as follows:Cash receipts:- 40% of March sales ($450,000 x 40%) = $180,000- 80% of February sales ($435,000 x 80%) = $348,000- 15% of January sales ($420,000 x 15%) = $63,000Total cash receipts = $591,000Cash payments:- Purchases (60% of April sales) = $470,000 x 60% = $282,000- Rent = $10,000- Wages and salaries = $50,000- Tax payment = $30,000- Interest payment = $15,000- Purchase of fixed assets = $20,000Total cash payments = $397,000Change in cash = Cash receipts - Cash payments = $591,000 - $397,000 = $194,000Less: Beginning cash balance = $0Ending cash balance = $194,000Therefore, Silly Sally's change in cash for March is a $40 increase in cash.

Silly Sally, Inc. Silly Sally, Inc. Forecasts the Following Sales Levels: January, $420;