Question

Morgan Company's budgeted income statement reflects the following amounts: Sales Purchases Expenses January $ 117,000 $...

Morgan Company's budgeted income statement reflects the following amounts:

Sales Purchases Expenses
January $ 117,000 $ 75,000 $ 23,700
February 107,000 63,000 23,900
March 122,000 78,250 26,700
April 127,000 81,500 28,300

Sales are collected 50% in the month of sale, 25% in the month following sale, and 24% in the second month following sale. One percent of sales is uncollectible and expensed at the end of the year.

Morgan pays for all purchases in the month following purchase and takes advantage of a 2% discount. The following balances are as of January 1:

Cash $ 85,000
Accounts receivable* 55,000
Accounts payable 69,000

*Of this balance, $27,500 will be collected in January and the remaining amount will be collected in February.

The monthly expense figures include $4,700 of depreciation. The expenses are paid in the month incurred.

Morgan’s expected cash balance at the end of January is:

84600

79680

89300

84380

103380

Business   Accounting   
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Answer #1

Answer is 84380.

calculation

January Month
Opening Cash           85,000
Sale collection
27500           27,500
(117000*50%)           58,500
Paid for Purchase         (67,620)
(69000*98%)
Expense         (19,000)
(23700-4700)
Closing Cash           84,380
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