Gilbert'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 balance on September 30 would be:

Question

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September sales = $150,000 x 1.20 = $180,000September collections:From August sales: $150,000 x 0.70 = $105,000From September sales: $180,000 x 0.30 = $54,000Total collections = $105,000 + $54,000 = $159,000September payments:For August purchases: $100,000 x 0.75 = $75,000For September purchases: $120,000 x 0.25 = $30,000Total payments = $75,000 + $30,000 = $105,000Ending cash balance = $7,500 + $159,000 - $105,000 = $61,500

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