Preston Fencing Company Sales over the past three months: SetmberOctober Novembe

Question

Preston Fencing Company Sales over the past three months: SetmberOctober November $105,000 $65,000 $45,000 What is the company's cash balance (assuming no expenses) at the end of November based on the following: 75% of all sales are CREDIT sales; cash receipts are 25 % of sales the collection period for credit sales is 60 days 25% Cash Sales 75% Credit Sales Collection in Novemeber 26,250.00 16,250.00 11,250.00 $ 78,750.00 48,750.0033,750.00 $78,750.00 Total Collection $ 26,250.00 16,250.00 90,000.00 $132,500.00

Explanation / Answer

Now, The cash balance at the end of November can be calculated as:

Cash balance from sales of October based on cash receipts - 25% of October sales = 0.25*65000 = 16250

Cash balance from sales of September based on cash receipts - 25% of September sales = 0.25*105000 = 26250

Cash balance from sales of November based on cash receipts - 25% of November sales = 0.25*45000 = 11250

Since credit sale collection period = 60.days

September credit sales will be collected at end of November

= 0.75*105000 = 78750

So, net cash at the end of November = 26250+16250+11250+78750

= 132500

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