Question

Walter Enterprises expects its September sales to be 20 % higher than its August sales of $195,000 Purchases were $145,000 in August and are expected to be $165,00C 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 follow 20% in the month of purchase and 80 % in the following month. The beginning cash balance on September 1 is $7,800. The ending cash balance on September 30 would be: Multiple Choice $28,300. $76,800 $57700 $65,500 $181,500 <Prey 32 of 40 Next

Answer 1

Answer: $65,500

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Working note - Computation of ending cash balance
Beginning cash balance on September 1		$7,800
Add: Cash collections in September
From the sales made in August         (Following month)                [$195,000 x 70%]	$136,500
From the sales made in September    (Same month)                       [($195,000 x 120%) x 30%]	$70,200
Total cash collections		$206,700
Less: Cash payments in September
For the purchases made in August          (Following month)         [$145,000 x 80%]	($116,000)
For the purchases made in September     (Same month)                [$165,000 x 20%]	($33,000)
Total cash payments		($149,000)
Ending cash balance on September 30       [Beginning cash balance + Total cash collections - Total cash payments]		$65,500