Question

Worton Distributing expects its September sales to be 20% higher than its August sales of $168,000. Purchases were $118,000 in August and are expected to be $138,000 in September. All sales are on credit and are expected to be collected as follows: 40% in the month of the sale and 60% in the following month. Purchases are paid 20% in the month of purchase and 80% in the following month. The cash balance on September 1 is $28,000. The ending cash balance on September 30 is estimated to be:

Answer 1

Worton Distributing

The ending cash balance on September 30 is estimated to be:

= $87,440

Step-by-step explanation:

a) Data and Calculations:

August sales = $168,000

September sales = $168,000 * 1.2 = $201,600

August purchases = $118,000

September purchases = $138,000

Collection of sales on credit: August September

Sales $168,000 $201,600

40% month of sale 67,200 80,640

60% month following 100,800

Total cash collections $181,440

Payment for purchases: August September

Purchases $118,000 $138,000

Payment:

20% month of purchase 23,600 27,600

80% month following 94,400

Total payment for purchases $122,000

Cash budget for September

Beginning balance $28,000

Cash collections 181,440

Available cash $209,440

Cash payments 122,000

Ending balance $87,440