Harold's expects its September sales to be 20% higher than its August sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000 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 $7,500. The ending cash balance on September 30 would be:

Question

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- September sales are expected to be 20% higher than August sales of $150,000, so September sales are estimated to be $180,000 ($150,000 x 1.20).
- 30% of September sales will be collected in September, which is $54,000 ($180,000 x 0.30).
- 70% of September sales will be collected in October, which is $126,000 ($180,000 x 0.70).
- Purchases for September are expected to be $120,000, with 25% paid in September ($30,000) and 75% paid in October ($90,000).
- The total cash inflow expected for September is $54,000 ($30,000 from collections and $24,000 from beginning cash balance).
- The total cash outflow expected for September is $109,000 ($90,000 from purchases and $19,000 from August purchases still unpaid).
- Therefore, the ending cash balance on September 30 is $136,500 ($7,500 beginning balance + $54,000 cash inflow - $109,000 cash outflow).

Harold's Expects Its September Sales to Be 20% Higher Than