Jumbotron Inc. had sales of $8,000 in November, $14,000 in December, and project
ID: 2804208 • Letter: J
Question
Jumbotron Inc. had sales of $8,000 in November, $14,000 in December, and projects sales of $10,000 for January, $12,000 for February, and $8,000 for March. The firm's cost of goods sold every month is equal to 70% of the next month's sales. The firm collects its receivables in 60 days and pays its payables in 30 days. The firm begins January 1 with $10,000 in cash. All sales and purchases are on credit.
What is Jumbotron's cash balance at the end of January?
A. $10,000
B. $11,000
C. $12,000
D. $13,500
E. $14,000
Explanation / Answer
Cost of Goods Sold =70% of next month sales
Receivables Collection =60 days
Payables =30days
Refer Cash Table prepared below,
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Hence, Option-b is the right answer.
CASH BUDGET November December January February March Credit Sales $8,000 $14,000 $10,000 $12,000 $8,000 Credit Purchases (@ 70% of next month sales) $9,800 $7,000 $8,400 $5,600 Beginning Cash Balance $10,000 Cash Receipts Cash Collection from Credit Sale (60 days) $8,000 $14,000 $10,000 Total Cash Receipts $8,000 $14,000 $10,000 Cash Disbursements Purchases (Payable in 30 days) $9,800 $7,000 $8,400 $5,600 Total Cash Disbursements $0 $9,800 $7,000 $8,400 $5,600 Net Cash Flow (Cash Recipts - Cash Disbursements) $0 ($9,800) $1,000 $5,600 $4,400 Ending Cash Balance (Opening Balance + Net Cash Flow) $0 ($9,800) $11,000 $5,600 $4,400Related Questions
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