BusyBody Company expects its November sales to be 25% higher than its October sales of $240,000. Purchases were $100,000 in October and are expected to be $100,000 in November. All sales are on credit and are collected as follows: 35% in the month of the sale and 60% in the following month. Purchases are paid 35% in the month of purchase and 65% in the following month. The cash balance on November 1 is $13,500. The cash balance on November 30 will be

Question

Quizplus · Accepted Answer

First, we need to calculate the expected sales for November: 
$240,000 x 1.25 = $300,000

Next, we need to calculate the collections for October and November sales: 
October sales: 
35% collected in October = $240,000 x 0.35 = $84,000 
60% collected in November = $240,000 x 0.6 = $144,000

November sales: 
35% collected in November = $300,000 x 0.35 = $105,000 
60% collected in December = $300,000 x 0.6 = $180,000

Total collections for November = $84,000 + $144,000 + $105,000 + $180,000 = $513,000

Now, we need to calculate the payments for October and November purchases: 
October purchases: 
35% paid in October = $100,000 x 0.35 = $35,000 
65% paid in November = $100,000 x 0.65 = $65,000

November purchases: 
35% paid in November = $100,000 x 0.35 = $35,000 
65% paid in December = $100,000 x 0.65 = $65,000

Total payments for November = $35,000 + $65,000 + $35,000 + $65,000 = $200,000

Finally, we can calculate the cash balance for November: 
Cash balance on November 1 = $13,500 
Add total collections for November = $513,000 
Subtract total payments for November = $200,000 
Cash balance on November 30 = $326,500

Therefore, the answer is C) $162,500.

BusyBody Company Expects Its November Sales to Be 25% Higher