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

First, let's calculate the expected sales and purchases for November:

Expected sales = $180,000 x 1.2 = $216,000
Expected purchases = $160,000

Now, let's calculate the cash collections from October and November sales:

October sales collected in October = $180,000 x 0.3 = $54,000
October sales collected in November = $180,000 x 0.6 = $108,000
November sales collected in November = $216,000 x 0.3 = $64,800

Total cash collections = $54,000 + $108,000 + $64,800 = $226,800

Next, let's calculate the cash payments for October and November purchases:

October purchases paid in October = $110,000 x 0.4 = $44,000
October purchases paid in November = $110,000 x 0.6 = $66,000
November purchases paid in November = $160,000 x 0.4 = $64,000

Total cash payments = $44,000 + $66,000 + $64,000 = $174,000

Finally, let's calculate the ending cash balance for November:

Starting cash balance = $13,500
Cash collections = $226,800
Cash payments = $174,000

Ending cash balance = $13,500 + $226,800 - $174,000 = $56,300

Therefore, the answer is B.

SuperOffice Company Expects Its November Sales to Be 20% Higher