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8 January, 01:54

4. A company expects its September sales to be 15% higher than its August sales of $140,000. Purchases were $75,000 in August and are expected to be $85,000 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: 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $71,500. The ending cash balance on September 30 would be: A. $121,800 B. $148,700 C. $140,300 D. $143,700 E. $135,300

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  1. 8 January, 02:20
    0
    Answer: C. $140,300

    Explanation:

    Cash balance on Sept 1 is $71,500

    Sales: $140,000*15%+$140,000

    Sales in sept = $21,000 + $140,000

    = $161,000

    Cash collected Sept = $161,000*30%

    = $48,300

    Cash collected in sept for August sales = $140,000*70% = $98,000

    Purchases Sept = $85,000

    Cash purchases = $85,000*25%

    = $21,250

    Cash purchases in August = $75,000*75% = $56,250

    Ending cash bal in Sept = $71,500 + $48,300 + 98,000 - $21,250 - 56,250 = $140,300
  2. 8 January, 02:53
    0
    C $140 300

    Explanation:

    First we identify credit and cash sales in both months

    Item August September

    Sales $140000 15% higher (140000*1.15) = $161000

    Purchases $75 000 $85000

    Cash sales for prev month (140000*0.7) = $98000

    for current month (161000*0.3) = 4830

    Purchases for prev month (75000*0.75) = 56250

    for current month (85000*0.25) = 21250

    Calculate the ending cash balance for September

    Opening balance = $71500

    So add cash sales and subtract cash purchases = 71500+98000+4830-56250-21250 = $140300
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