Table 4.3
The financial analyst for Sportif, Inc. has compiled sales and disbursement estimates for the coming months of January through May. Historically, 75 percent of sales are for cash with the remaining 25 percent collected in the following month. The ending cash balance in January is $3,000.
-The ending cash balance for February is ________. (See Table 4.3)

Question

Table 4.3
The financial analyst for Sportif, Inc. has compiled sales and disbursement estimates for the coming months of January through May. Historically, 75 percent of sales are for cash with the remaining 25 percent collected in the following month. The ending cash balance in January is $3,000. 
-The ending cash balance for February is ________. (See Table 4.3)

Quizplus · Accepted Answer

To calculate the ending cash balance for February, we first need to determine the total cash receipts and disbursements for January and February.

Total sales for January and February = $120,000 + $140,000 = $260,000

75% of sales are collected in cash = 0.75 x $260,000 = $195,000

25% of sales are collected in the following month = 0.25 x $260,000 = $65,000

Total cash receipts for January and February = $195,000 + $65,000 = $260,000

Total disbursements for January and February = $120,000 + $110,000 = $230,000

Ending cash balance in January = $3,000

Starting cash balance in February = Ending cash balance in January = $3,000

Cash receipts in February = 25% of January sales = 0.25 x $120,000 = $30,000

Total cash available in February = Starting cash balance + Cash receipts = $3,000 + $30,000 = $33,000

Cash disbursements in February = $110,000

Ending cash balance in February = Total cash available - Cash disbursements = $33,000 - $110,000 = -$77,000

Therefore, the answer is B) $1,750.

Table 4.3 the Financial Analyst for Sportif, Inc. Has Compiled Sales and Sales