Please show all work 4. GRAYDEN Widgets, Inc. began operations on January 1 of t
ID: 2552851 • Letter: P
Question
Please show all work 4. GRAYDEN Widgets, Inc. began operations on January 1 of the current year with a $12,000 cash balance. Forty percent (40%) of sales are collected in the month of sale; 60% are collected in the month following sale. Similarly, 20% of purchases are paid in the month of purchase, and 80% are paid in the month following purchase. Additionally, operating expenses are paid in the month incurred and include monthly depreciation charges of $2,500. The following data apply to January and February:
January
February
Sales
$35,000
$55,000
Purchases
30,000
40,000
Operating expenses
7,000
9,000
Required: Compute the following: A. January Cash Receipts: ________________ B. January Cash Disbursements: ________________ C. Ending January Cash Balance: _______________ D. February Cash Receipts: ________________ E. February Cash Disbursements: ________________ F. Ending February Cash Balance: _______________
January
February
Sales
$35,000
$55,000
Purchases
30,000
40,000
Operating expenses
7,000
9,000
Explanation / Answer
A. January cash receipts = 40% of january sales
= 35,000 * 40%
= 14,000
B. January cash disbursements = 20% of January purchases + January operating expenses excluding depreciation
= (30,000*20%) + (7,000-2,500)
= 10,500
C. Ending January cash balance = Beginning January cash balance + January cash receipts - January cash disbursements
= 12,000 + 14,000 - 10,500
= 15,500
D. February cash receipts = 60% of January sales + 40% of February sales
= (35,000*60%) + (55,000*40%)
= 43,000
E. February cash disbursements = 80% of January purchases + 20% of February purchases + february operating expenses excluding depreciation
= (30,000*80%) + (40,000*20%) + (9,000-2,500)
= 38,500
F. Ending february cash balance = Beginning february cash balance + February cash receipts - February cash payments
= 15,500 + 43,000 - 38,500
= 20,000
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