Question

Walter Enterprises expects its September sales to be 20% higher than its August sales of $225,000. Purchases were $175,000 in August and are expected to be $195,000 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: 20% in the month of purchase and 80% in the following month. The beginning cash balance on September 1 is $8,400. The ending cash balance on September 30 would be:

Answer 1

Answer:

$67,900

Explanation:

As per given data

Sales for September  $225,000 x 120% = $270,000

Purchases for September = $195,000

September cash flows

Collection from September sales = $270,000 x 30% = $81,000

Collection from August sales = $225,000 x 70% = $157,500

Total Collection in September = $81,000 + $157,500 = $238,500

Payments of September purchases = $195,000 x 20% = $39,000

Payments of August purchases = $175,000 x 80% = $140,000

Total Payments in September = $39,000 + $140,000 = $179,000

Cash Balance at the end of September = Beginning cash balance + Cash collections - cash payments = $8,400 + $238,500 - $179,000 = $67,900

Answer 2

Answer:

$67900

Explanation:

Opening cash In September   $8,400

                       August        September

Sales               225,000           270,000 (225000*1.20)

Purchases       175000             195000

Sales collection

August  =       30%*   225000 = 67500

September    = 157500 + (30%*270000)=238500

Payment

August 175000*20%= 35000

September = 140000 + (20%*195000)= 179000

Cash flow for September

Opening cash balance - 8400

Cash Inflow                    238500

Cash Outflow                 ( 179,000)

                                        67900