# Worton distributing expects its september sales to be

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Chapter 26 / Exercise 3
Economics: A Contemporary Introduction
McEachern
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59. Worton Distributing expects its September sales to be 25% higher than its August sales of \$150,000. Purchases were \$100,000 in Augustand are expected to be \$120,000 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. Purchases are paid 25% in the month of purchase and 75% in the following month. The beginning cash balanceon September 1 is \$10,000. The ending cash balance on September 30 would be:A. \$56,250.B. \$56,500.C. \$65,250.D. \$66,250.E. \$76,250.
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Chapter 26 / Exercise 3
Economics: A Contemporary Introduction
McEachern
Expert Verified
1. Beginning cash balance (given) = \$10,0002. Cash receipts from credit sales made in August (\$150,000 x 0.70) = \$105,0003. Cash receipts from credit sales made in September ([\$150,000 x 1.25] x 0.30) = \$56,2504. Cash disbursements from purchases made in August (\$100,000 x 0.75) = \$75,0005. Cash disbursements from purchases made in September (\$120,000 x 0.25) = \$30,0006. Ending cash balance = \$10,000 + \$105,000 - \$75,000 - \$30,000 + \$56,250 = \$66,2501. Beginning inventory (given) = \$100,0002. Gross Profit = \$300,000 * 20% = \$60,0003. Cost of Goods Sold During the Quarter = \$300,000 - \$60,000 = \$240,0004. Desired ending inventory = \$40,0005. Required inventory purchases to meet desired ending inventory = \$240,000 + \$40,000 - \$100,000 = \$180,0001. Jan. budgeted cash receipts from Nov. credit sales = \$12,0002. Dec. 31 accounts receivable balance from Dec. sales = (\$54,000 - \$12,000) = \$42,0003. Total December credit sales = (42,000/0.6) = \$70,0004. Portion of December credit sales budgeted to receive in January = \$42,000 - \$7,000 = \$35,0006. Jan. cash sales = (100,000 * 20%) = \$20,0007. Jan. credit sales = \$100,000 - \$20,000 = \$80,0008. Jan. cash receipts from Jan. credit sales = (\$80,000 x 40%) = \$32,0009. Total budgeted January cash receipts = \$12,000 + \$35,000 + \$20,000 + \$32,000 = \$99,0001. Cash sales in February (\$120,000 x 0.20) = \$24,0002. Collection in February of a portion of February's credit sales = (\$120,000 x 0.80) x 0.40 = \$38,4003. Collection in February of a portion of January's credit sales = (\$100,000 x 0.80) x 0.50 = \$40,0003. Total December credit sales: December 31 \$54,000 A/R less November portion \$12,000 = \$42,000 and this is 60% of total December sales.Therefore December sales = (42,000/0.6) = \$70,0004. Portion of Dec. credit sales budgeted to receive in February = (\$70,000 * 10%) = \$7,0005. Budgeted cash receipts for February = \$24,000 + \$38,400 + \$40,000 + \$7,000 = \$109,400
Blocher - Chapter 10 #59Difficulty: HardLearning Objective: 10-460. Tony's Fashions forecasts sales of \$300,000 for the quarter ended December 31. Its gross profit rate is 20% of sales, and its September 30inventory is \$100,000. If the December 31 inventory is targeted at \$40,000, budgeted purchases for the quarter should be:
Blocher - Chapter 10 #60Difficulty: MediumLearning Objective: 10-461. Boone Co.'s sales are 20% for cash and 80% on credit. Credit sales are collected as follows: 40% in the month of sale, 50% in the month
after the sale, and 10% in the second month. On December 31, the accounts receivable balance is\$54,000, of which \$12,000 is fromNovember sales. Total sales for January and February are budgeted to be \$100,000 and \$120,000, respectively.What are the budgeted cash receipts for January?
Blocher - Chapter 10 #61Difficulty: MediumLearning Objective: 10-4