Question

On January 1, Easton Company had cash on hand of $110,000. All of January's $220,000 sales were on account. December sales of $206,000 were also all on account. Experience has shown that Easton typically collects 30% of receivables in the month of the sale and the balance the following month. All materials and supplies are purchased on account and Easton has a history of paying for half of these purchases in the month of purchase and half the following month. Such purchases were $174,000 for December and $172,000 for January. All other expenses including wages are paid in the month incurred. These amounted to $42,000 in December and $60,000 in January. Use this information to determine the projected ending balance of cash on hand for January. (Round answer to the nearest whole dollar)

Answer 1

Cash budget for January

Beginning cash balance	110,000
Cash receipt from customer	210,200
Total available cash	320,200
Cash payment to suppliers	-173,000
Cash payment for wages	-60,000
Ending cash balance	$87,200

Cash receipt from customers in January = 30% of January sales + 70% of December sales

= 220,000 x 30% + 206,000 x 70%

= 66,000 + 144,200

= $210,200

Cash payment to suppliers in January = 50% of December purchase + 50% of January purchase

= 174,000 x 50% + 172,000 x 50%

= 87,000 + 86,000

= $173,000

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