Question

BusyBody Company expects its November sales to be 20​% higher than its October sales of $ 160 comma 000. Purchases were $ 90 comma 000 in October and are expected to be $ 110 comma 000 in November. All sales are on credit and are collected as​ follows: 25​% in the month of the sale and 70​% in the following month. Purchases are paid 30​% in the month of purchase and 70​% in the following month. The cash balance on November 1 is $ 13 comma 400. The cash balance on November 30 will be

Answer 1

Answer:

Cash balance on November 30 = $77,400

Explanation:

October sales  $160,000

November sales $192,000

Calculation: November sales = $160,000 + (160,000 × 20%) = $160,000 + 32,000 = $192,000.

Collection from November $48,000

As 70% will be collected from the next month, therefore we can collect 70% from the month of October = $112,000

Total cash collection in November = $48,000 + $112,000 = $160,000

Cash disbursement for the month of November $110,000 × 30% = $33,000

70% from the month of October $90,000 × 70% = $63,000

Total cash disbursement = $96,000

The cash balance on November 1  = $13,400

Add: cash collection                        = $160,000

Less: cash disbursement                = ($96,000)

Cash balance on November 30     = $77,400