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sp2606 [1]
3 years ago
5

Romona Company expects its November sales to be 20​% higher than its October sales of $ 240 comma 000. All sales are on credit a

nd are collected as​ follows: 25​% in the month of the sale and 70​% in the following month. Purchases were $ 70 comma 000 in October and are expected to be $ 150 comma 000 in November. Purchases are paid 35​% in the month of purchase and 65​% in the following month. The cash balance on November 1 is $ 13 comma 700. The cash balance on November 30 will be
Business
1 answer:
kotykmax [81]3 years ago
4 0

Answer:

The cash balance on November 30 amounts to $155,700

Explanation:

Cash balance on November 30 = Beginning balance + Collection of cash from October sales + Collection of cash from November sales - Payments for October Purchases - Payments for November Purchases

where

Beginning balance is $13,700

Collection of cash from October sales =  October Sales × % amount collected

                                                                = $240,000 × 70%

                                                                = $168,000

Collection of cash from November sales =  November Sales × % amount collected

                                                                = $240,000 × 1.20 × 25%

                                                                = $72,000

Payments for October Purchases = October Purchases × % amount paid

                                                        = $70,000 × 65%

                                                        = $45,500

Payments for November Purchases = November Purchases × % amount paid

                                                        = $150,000 × 35%

                                                        = $52,500

Putting the values in the above formula

Cash balance on November 30 = $13,700 + $168,000 + $72,000 - $45,500 - $52,500

= $155,700

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