A company expects its September sales to be 15% higher than its August sales of $140,000.Purchases were $75,000 in August and are expected to be $85,000 in September.All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month.Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month.The beginning cash balance on September 1 is $71,500.The ending cash balance on September 30 would be:

Question

Quizplus · Accepted Answer

September sales: 1.15 x $140,000 = $161,000
Cash inflows: [Beg. $71,500 + Aug. sales (.7 x $140,000) + Sept. sales (.3 x $161,000)] = $217,800
Cash outflows: [Aug. purch. (.75 x $75,000) + Sept. purch. ( .25 x $85,000)] = $77,500
$217,800 - $77,500 = $140,300

A Company Expects Its September Sales to Be 15% Higher