Question

# On January 1, Easton Company had cash on hand of \$115,000. All of January's \$228,000 sales...

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)

#### Homework Answers

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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