Question

# On January 1, Easton Company had cash on hand of \$110,000. All of January's \$220,000 sales...

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)

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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