Question

​CraftCo, Inc.'s projected sales for the first six months of 2012 are given​ below: Jan. ​$500,000 April ​$490,000 Feb. ​$740,000 May ​$740,000 Mar. ​$380,000 June ​$610,000 ​40% of sales are collected in cash at time of​ sale, 50% are collected in the month following the​ sale, and the remaining​ 10% are collected in the second month following the sale. Cost of goods sold is​ 60% of sales. Purchases are made in the month prior to the​ sales, and payments for purchases are made in the month of the sale. Total other cash expenses are​ $40,000/month. The​ company's cash balance as of February​ 28, 2012 will be​ $25,000. Excess cash will be used to retire shortminusterm borrowing​ (if any).​ CraftCo, Inc. has no short term borrowing as of February​ 28, 2012 Assume that the interest rate on shortminusterm borrowing is​ 1% per month. The company must have a minimum cash balance of​ $15,000 at the beginning of each month. What is​ CraftCo, Inc.'s total cash disbursements for April​ 2012? A. ​$414,000 B. ​$374,000 C. ​$294,000 D. ​$334,000

Answer 1

$460,000

Step-by-step explanation:

Given that,

Sales:

Jan. = ​$500,000

April = ​$490,000

Feb. = ​$740,000

May = ​$740,000

Mar. = ​$380,000

June = ​$610,000

Total cash receipts for April 2012:

= Cash receipts from February Sales + Cash receipts from March Sales + Cash receipts from April Sales

= (740,000 × 10%) + (380,000 × 50%) + (490,000 × 40%)

= $74,000 + $190,000 + $196,000

= $460,000