SuperOffice Company expects its November sales to be 20% higher than its October sales of $180,000.Purchases were $110,000 in October and are expected to be $160,000 in November.All sales are on credit and are collected as follows: 30% in the month of the sale and 60% in the following month.Purchases are paid 40% in the month of purchase and 60% 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

To determine the cash balance on November 30, we need to calculate the cash receipts and cash payments for November.

Cash receipts for November sales:

- 30% of November sales collected in November: 0.3 x 1.2 x $180,000 = $64,800 (Note: we multiply by 1.2 to account for the 20% increase in sales)
- 60% of October sales collected in November: 0.6 x $180,000 = $108,000

Total cash receipts in November = $64,800 + $108,000 = $172,800

Cash payments for November purchases:

- 40% of October purchases paid in November: 0.4 x $110,000 = $44,000
- 60% of November purchases paid in December: 0.6 x $160,000 = $96,000

Total cash payments in November = $44,000 + $96,000 = $140,000

To determine the cash balance on November 30, we add the cash balance on November 1 to the net cash inflow for the month (cash receipts minus cash payments):

Cash balance on November 30 = $13,500 + ($172,800 - $140,000) = $46,300

Therefore, the answer is B) $56,300.

SuperOffice Company Expects Its November Sales to Be 20% Higher