Question

On January 1, Easton Company had cash on hand of $115,000. All of January's $228,000 sales were on account. December sales of $246,000 were also all on account. Experience has shown that Easton typically collects 20% 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 $150,000 for December and $181,000 for January. All other expenses including wages are paid in the month incurred. These amounted to $42,000 in December and $64,000 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	115,000
Cash receipt from customers	242,400
Total available cash	357,400
Cash payment to suppliers	-165,500
Cash payment for wages	-64,000
Ending cash balance	$127,900

Cash receipt from customers in January = 20% of January sales + 80% of December sales

= 228,000 x 20% + 246,000 x 80%

= 45,600+196,800

= $242,400

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

= 150,000 x 50% + 181,000 x 50%

= 75,000+90,500

= $165,500

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